Xiamen Intretech's (SZSE:002925) Dividend Is Being Reduced To CN¥0.46

Xiamen Intretech Inc. (SZSE:002925) is reducing its dividend from last year's comparable payment to CN¥0.46 on the 31st of May. Despite the cut, the dividend yield of 3.5% will still be comparable to other companies in the industry.

View our latest analysis for Xiamen Intretech

Xiamen Intretech's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. At the time of the last dividend payment, Xiamen Intretech was paying out a very large proportion of what it was earning and 172% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

The next year is set to see EPS grow by 137.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Xiamen Intretech's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2018, the annual payment back then was CN¥0.471, compared to the most recent full-year payment of CN¥0.46. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Xiamen Intretech's EPS has fallen by approximately 12% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Xiamen Intretech's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Xiamen Intretech 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. As an example, we've identified 1 warning sign for Xiamen Intretech that you should be aware of before investing. Is Xiamen Intretech not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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