RoadMainTLtd (SHSE:603860) Will Pay A Larger Dividend Than Last Year At CN¥0.1547

The board of RoadMainT Co.,Ltd. (SHSE:603860) has announced that the dividend on 31st of May will be increased to CN¥0.1547, which will be 34% higher than last year's payment of CN¥0.115 which covered the same period. Although the dividend is now higher, the yield is only 0.4%, which is below the industry average.

View our latest analysis for RoadMainTLtd

RoadMainTLtd's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, RoadMainTLtd was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 3.0% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 23%, which is definitely feasible to continue.

RoadMainTLtd's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of CN¥0.141 in 2018 to the most recent total annual payment of CN¥0.115. This works out to be a decline of approximately 3.2% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

RoadMainTLtd May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though RoadMainTLtd's EPS has declined at around 3.0% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for RoadMainTLtd (of which 1 is significant!) you should know about. Is RoadMainTLtd 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.