Huaan Securities (SHSE:600909) Has Announced A Dividend Of CN¥0.10

Huaan Securities Co., Ltd. (SHSE:600909) has announced that it will pay a dividend of CN¥0.10 per share on the 28th of June. Based on this payment, the dividend yield on the company's stock will be 2.3%, which is an attractive boost to shareholder returns.

See our latest analysis for Huaan Securities

Huaan Securities' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Huaan Securities is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 29.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

Huaan Securities Is Still Building Its Track Record

Huaan Securities' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 7 years was CN¥0.06 in 2017, and the most recent fiscal year payment was CN¥0.10. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

Huaan Securities May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Huaan Securities hasn't seen much change in its earnings per share over the last five years. While growth may be thin on the ground, Huaan Securities could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Huaan Securities' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Huaan Securities is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 Huaan Securities you should be aware of, and 1 of them is concerning. 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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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.

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