Shengyuan Environmental ProtectionLtd's (SZSE:300867) Shareholders Will Receive A Smaller Dividend Than Last Year

Shengyuan Environmental Protection Co.,Ltd. (SZSE:300867) is reducing its dividend from last year's comparable payment to CN¥0.054 on the 28th of June. This means that the dividend yield is 0.5%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for Shengyuan Environmental ProtectionLtd

Shengyuan Environmental ProtectionLtd's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Shengyuan Environmental ProtectionLtd was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, EPS could fall by 11.8% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 8.3%, which is definitely feasible to continue.

Shengyuan Environmental ProtectionLtd'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. The dividend has gone from an annual total of CN¥0.12 in 2021 to the most recent total annual payment of CN¥0.054. The dividend has fallen 55% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Shengyuan Environmental ProtectionLtd's earnings per share has shrunk at 12% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Our Thoughts On Shengyuan Environmental ProtectionLtd's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Shengyuan Environmental ProtectionLtd is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Shengyuan Environmental ProtectionLtd that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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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