COFCO Technology & Industry (SZSE:301058) Is Reducing Its Dividend To CN¥0.15

COFCO Technology & Industry Co., Ltd.'s (SZSE:301058) dividend is being reduced from last year's payment covering the same period to CN¥0.15 on the 13th of June. Based on this payment, the dividend yield will be 1.5%, which is lower than the average for the industry.

See our latest analysis for COFCO Technology & Industry

COFCO Technology & Industry'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. However, prior to this announcement, COFCO Technology & Industry's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 59.3% over the next year. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

COFCO Technology & Industry's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. There hasn't been much of a change in the dividend over the last 2 years. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. COFCO Technology & Industry has seen EPS rising for the last five years, at 23% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

COFCO Technology & Industry Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like COFCO Technology & Industry does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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 picked out 1 warning sign for COFCO Technology & Industry that investors should know about before committing capital to this stock. Is COFCO Technology & Industry not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.