Qingdao Greensum Ecology (SZSE:300948) Will Pay A Larger Dividend Than Last Year At CN¥0.06

Qingdao Greensum Ecology Co., Ltd.'s (SZSE:300948) dividend will be increasing from last year's payment of the same period to CN¥0.06 on 31st of May. Even though the dividend went up, the yield is still quite low at only 0.6%.

See our latest analysis for Qingdao Greensum Ecology

Qingdao Greensum Ecology's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Qingdao Greensum Ecology was earning enough to cover the dividend, but free cash flows weren't positive. 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.

Looking forward, EPS could fall by 20.7% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 42%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Qingdao Greensum Ecology Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2021, the dividend has gone from CN¥0.0533 total annually to CN¥0.06. This implies that the company grew its distributions at a yearly rate of about 4.0% over that duration. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Earnings per share has been sinking by 21% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Qingdao Greensum Ecology's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 2 warning signs for Qingdao Greensum Ecology you should be aware of, and 1 of them can't be ignored. Is Qingdao Greensum Ecology not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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