Shenzhen Fuanna Bedding and FurnishingLtd's (SZSE:002327) Upcoming Dividend Will Be Larger Than Last Year's

Shenzhen Fuanna Bedding and Furnishing Co.,Ltd's (SZSE:002327) dividend will be increasing from last year's payment of the same period to CN¥0.65 on 19th of June. This will take the annual payment to 5.9% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Shenzhen Fuanna Bedding and FurnishingLtd

Shenzhen Fuanna Bedding and FurnishingLtd's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Shenzhen Fuanna Bedding and FurnishingLtd's was paying out quite a large proportion of earnings and 85% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

EPS is set to grow by 27.8% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 89% which is a bit high but can definitely be sustainable.

Shenzhen Fuanna Bedding and FurnishingLtd Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from CN¥0.0385 total annually to CN¥0.65. This works out to be a compound annual growth rate (CAGR) of approximately 33% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Shenzhen Fuanna Bedding and FurnishingLtd hasn't seen much change in its earnings per share over the last five years. Slow growth and a high payout ratio could mean that Shenzhen Fuanna Bedding and FurnishingLtd has maxed out the amount that it has been able to pay to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On Shenzhen Fuanna Bedding and FurnishingLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think Shenzhen Fuanna Bedding and FurnishingLtd will make a great income stock. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Shenzhen Fuanna Bedding and FurnishingLtd that investors should know about before committing capital to this stock. 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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