Shenwan Hongyuan Group (SZSE:000166) Will Pay A Larger Dividend Than Last Year At CN¥0.056

The board of Shenwan Hongyuan Group Co., Ltd. (SZSE:000166) has announced that it will be paying its dividend of CN¥0.056 on the 20th of August, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.

Check out our latest analysis for Shenwan Hongyuan Group

Shenwan Hongyuan Group's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Shenwan Hongyuan Group's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 111.4%. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.

Shenwan Hongyuan Group's Dividend Has Lacked Consistency

Looking back, Shenwan Hongyuan Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of CN¥0.10 in 2017 to the most recent total annual payment of CN¥0.056. This works out to be a decline of approximately 7.9% 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 May Be Hard To Come By

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. In the last five years, Shenwan Hongyuan Group's earnings per share has shrunk at approximately 6.0% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Shenwan Hongyuan Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Shenwan Hongyuan Group's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. As an example, we've identified 1 warning sign for Shenwan Hongyuan Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.