Guangdong Topstrong Living Innovation and Integration (SZSE:300749) Will Pay A Smaller Dividend Than Last Year

Guangdong Topstrong Living Innovation and Integration Co., Ltd. (SZSE:300749) has announced that on 12th of June, it will be paying a dividend ofCN¥0.03, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 0.6%, which only provides a modest boost to overall returns.

See our latest analysis for Guangdong Topstrong Living Innovation and Integration

Guangdong Topstrong Living Innovation and Integration Is Paying Out More Than It Is Earning

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Guangdong Topstrong Living Innovation and Integration's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

If the company can't turn things around, EPS could fall by 41.5% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 181%, which is definitely a bit high to be sustainable going forward.

Guangdong Topstrong Living Innovation and Integration's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2019, the dividend has gone from CN¥0.122 total annually to CN¥0.03. This works out to a decline of approximately 75% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Guangdong Topstrong Living Innovation and Integration's earnings per share has shrunk at 42% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Guangdong Topstrong Living Innovation and Integration's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Guangdong Topstrong Living Innovation and Integration 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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Guangdong Topstrong Living Innovation and Integration you should be aware of, and 1 of them is a bit unpleasant. Is Guangdong Topstrong Living Innovation and Integration not quite the opportunity you were looking for? Why not check out our selection of top 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.