Hangzhou Robam Appliances (SZSE:002508) Will Pay A Dividend Of CN¥0.50

The board of Hangzhou Robam Appliances Co., Ltd. (SZSE:002508) has announced that it will pay a dividend of CN¥0.50 per share on the 29th of May. This means the annual payment will be 2.0% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Hangzhou Robam Appliances

Hangzhou Robam Appliances' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Hangzhou Robam Appliances' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 27.8% over the next year. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

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¥0.137 total annually to CN¥0.50. This means that it has been growing its distributions at 14% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Hangzhou Robam Appliances May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings have grown at around 3.3% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Hangzhou Robam Appliances could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, we think Hangzhou Robam Appliances is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Hangzhou Robam Appliances 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.