Hongda High-Tech HoldingLtd's (SZSE:002144) Dividend Will Be Increased To CN¥0.15

The board of Hongda High-Tech Holding Co.,Ltd. (SZSE:002144) has announced that it will be paying its dividend of CN¥0.15 on the 20th of June, an increased payment from last year's comparable dividend. This takes the annual payment to 1.8% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Hongda High-Tech HoldingLtd

Hongda High-Tech HoldingLtd's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, Hongda High-Tech HoldingLtd's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 2.0% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 31%, which is definitely feasible to continue.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from CN¥0.20 total annually to CN¥0.15. Doing the maths, this is a decline of about 2.8% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, Hongda High-Tech HoldingLtd's earnings per share has shrunk at approximately 2.0% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Hongda High-Tech HoldingLtd's payments are rock solid. 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Hongda High-Tech HoldingLtd you should be aware of, and 1 of them shouldn't be ignored. 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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