Shenzhen Crastal TechnologyLtd (SZSE:300824) Will Pay A Larger Dividend Than Last Year At CN¥0.20

Shenzhen Crastal Technology Co.,Ltd (SZSE:300824) will increase its dividend from last year's comparable payment on the 8th of May to CN¥0.20. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.

See our latest analysis for Shenzhen Crastal TechnologyLtd

Shenzhen Crastal TechnologyLtd's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before this announcement, Shenzhen Crastal TechnologyLtd was paying out 86% of earnings, but a comparatively small 73% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 60.0%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 54% which would be quite comfortable going to take the dividend forward.

Shenzhen Crastal TechnologyLtd's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The annual payment during the last 4 years was CN¥0.267 in 2020, and the most recent fiscal year payment was CN¥0.20. This works out to be a decline of approximately 6.9% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings per share has been sinking by 13% over the last 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.

Our Thoughts On Shenzhen Crastal TechnologyLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think Shenzhen Crastal TechnologyLtd will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Shenzhen Crastal TechnologyLtd 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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