Hangzhou Guotai Environmental Protection TechnologyLtd (SZSE:301203) Has Announced A Dividend Of CN¥1.50

The board of Hangzhou Guotai Environmental Protection Technology Co.,Ltd. (SZSE:301203) has announced that it will pay a dividend on the 28th of May, with investors receiving CN¥1.50 per share. This means the annual payment is 4.6% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Hangzhou Guotai Environmental Protection TechnologyLtd

Hangzhou Guotai Environmental Protection TechnologyLtd's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Hangzhou Guotai Environmental Protection TechnologyLtd was paying out a very large proportion of what it was earning and 122% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

EPS is set to grow by 18.9% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 80%, which is on the higher side, but certainly still feasible.

Hangzhou Guotai Environmental Protection TechnologyLtd Is Still Building Its Track Record

Without a track record of dividend payments, we can't make a judgement on how stable it 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.

Dividend Growth Could Be Constrained

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Hangzhou Guotai Environmental Protection TechnologyLtd has grown earnings per share at 19% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think Hangzhou Guotai Environmental Protection TechnologyLtd is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Hangzhou Guotai Environmental Protection TechnologyLtd that investors should know about before committing capital to this stock. Is Hangzhou Guotai 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.