Anhui Zhonghuan Environmental Protection TechnologyLtd (SZSE:300692) Has Affirmed Its Dividend Of CN¥0.04

Anhui Zhonghuan Environmental Protection Technology Co.,Ltd (SZSE:300692) has announced that it will pay a dividend of CN¥0.04 per share on the 19th of June. This means the annual payment will be 0.9% of the current stock price, which is lower than the industry average.

View our latest analysis for Anhui Zhonghuan Environmental Protection TechnologyLtd

Anhui Zhonghuan Environmental Protection TechnologyLtd'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, Anhui Zhonghuan Environmental Protection TechnologyLtd's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 2.4% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 20%, which is in the range that makes us comfortable with the sustainability of the dividend.

Anhui Zhonghuan Environmental Protection TechnologyLtd's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 6 years was CN¥0.0175 in 2018, and the most recent fiscal year payment was CN¥0.04. This means that it has been growing its distributions at 15% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Anhui Zhonghuan Environmental Protection TechnologyLtd 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. However, Anhui Zhonghuan Environmental Protection TechnologyLtd has only grown its earnings per share at 2.4% per annum over the past five years. If Anhui Zhonghuan Environmental Protection TechnologyLtd is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Anhui Zhonghuan Environmental Protection TechnologyLtd's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Anhui Zhonghuan Environmental Protection TechnologyLtd is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Anhui Zhonghuan Environmental Protection TechnologyLtd (1 can't be ignored!) that you should be aware of before investing. Is Anhui Zhonghuan Environmental Protection TechnologyLtd 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.

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