Guangzhou Shangpin Home Collection (SZSE:300616) Will Pay A Larger Dividend Than Last Year At CN¥0.90

The board of Guangzhou Shangpin Home Collection Co., Ltd. (SZSE:300616) has announced that it will be paying its dividend of CN¥0.90 on the 28th of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 6.3%, which shareholders will be pleased with.

See our latest analysis for Guangzhou Shangpin Home Collection

Guangzhou Shangpin Home Collection's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to grow by 197.5% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 85% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Guangzhou Shangpin Home Collection's Dividend Has Lacked Consistency

Looking back, Guangzhou Shangpin Home Collection's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of CN¥0.556 in 2018 to the most recent total annual payment of CN¥0.90. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Guangzhou Shangpin Home Collection might have put its house in order since then, but we remain cautious.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 33% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We should note that Guangzhou Shangpin Home Collection has issued stock equal to 12% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

We're Not Big Fans Of Guangzhou Shangpin Home Collection's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Guangzhou Shangpin Home Collection you should be aware of, and 1 of them shouldn't be ignored. Is Guangzhou Shangpin Home Collection not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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