Dongguan Yiheda Automation (SZSE:301029) Is Increasing Its Dividend To CN¥0.40

The board of Dongguan Yiheda Automation Co., Ltd (SZSE:301029) has announced that it will be paying its dividend of CN¥0.40 on the 23rd of May, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.0%, which is below the industry average.

Check out our latest analysis for Dongguan Yiheda Automation

Dongguan Yiheda Automation's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Dongguan Yiheda Automation was paying only paying out a fraction of earnings, but the payment was a massive 97% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 49.7%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Dongguan Yiheda Automation Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of CN¥0.208 in 2022 to the most recent total annual payment of CN¥0.25. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Dongguan Yiheda Automation to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Dongguan Yiheda Automation has seen EPS rising for the last five years, at 35% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Dongguan Yiheda Automation's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Dongguan Yiheda Automation (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Dongguan Yiheda Automation not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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