Joy Kie's (SZSE:300994) Shareholders Will Receive A Smaller Dividend Than Last Year

Joy Kie Corporation Limited (SZSE:300994) is reducing its dividend from last year's comparable payment to CN¥0.365 on the 5th of June. The yield is still above the industry average at 3.1%.

Check out our latest analysis for Joy Kie

Joy Kie's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. At the time of the last dividend payment, Joy Kie was paying out a very large proportion of what it was earning and 178% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 97.0%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

Joy Kie's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of CN¥0.60 in 2021 to the most recent total annual payment of CN¥0.365. Dividend payments have fallen sharply, down 39% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share has been sinking by 19% over the last three years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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.

Joy Kie'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. While Joy Kie is earning enough to cover the payments, the cash flows are lacking. We don't think Joy Kie is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Joy Kie you should be aware of, and 1 of them is a bit concerning. Is Joy Kie 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.