Hangzhou Greatstar Industrial (SZSE:002444) Is Reducing Its Dividend To CN¥0.10

Hangzhou Greatstar Industrial Co., Ltd (SZSE:002444) has announced that on 13th of June, it will be paying a dividend ofCN¥0.10, which a reduction from last year's comparable dividend. This means that the dividend yield is 0.8%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Hangzhou Greatstar Industrial

Hangzhou Greatstar Industrial's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Hangzhou Greatstar Industrial 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.

The next year is set to see EPS grow by 46.7%. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CN¥0.10 in 2014 to the most recent total annual payment of CN¥0.20. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Hangzhou Greatstar Industrial might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Hangzhou Greatstar Industrial has grown earnings per share at 17% per year over the past five years. Hangzhou Greatstar Industrial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Hangzhou Greatstar Industrial's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Hangzhou Greatstar Industrial does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 instance, we've picked out 1 warning sign for Hangzhou Greatstar Industrial that investors should take into consideration. 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.