Zhejiang Hengwei Battery's (SZSE:301222) Shareholders Will Receive A Smaller Dividend Than Last Year

Zhejiang Hengwei Battery Co., Ltd.'s (SZSE:301222) dividend is being reduced from last year's payment covering the same period to CN¥0.30 on the 7th of June. This means that the dividend yield is 1.3%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for Zhejiang Hengwei Battery

Zhejiang Hengwei Battery's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Zhejiang Hengwei Battery's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 10.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

Zhejiang Hengwei Battery Is Still Building Its Track Record

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's encouraging to see that Zhejiang Hengwei Battery has been growing its earnings per share at 10% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Zhejiang Hengwei Battery's prospects of growing its dividend payments in the future.

Our Thoughts On Zhejiang Hengwei Battery's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Zhejiang Hengwei Battery is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Zhejiang Hengwei Battery has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Zhejiang Hengwei Battery 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.