Cangzhou Mingzhu PlasticLtd's (SZSE:002108) Dividend Will Be CN¥0.10

Cangzhou Mingzhu Plastic Co.,Ltd. (SZSE:002108) has announced that it will pay a dividend of CN¥0.10 per share on the 27th of May. Based on this payment, the dividend yield on the company's stock will be 2.8%, which is an attractive boost to shareholder returns.

View our latest analysis for Cangzhou Mingzhu PlasticLtd

Cangzhou Mingzhu PlasticLtd's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Cangzhou Mingzhu PlasticLtd's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. 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.

EPS is set to fall by 4.6% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 73%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.0532 in 2014 to the most recent total annual payment of CN¥0.10. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Cangzhou Mingzhu PlasticLtd's EPS has declined at around 4.6% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Cangzhou Mingzhu PlasticLtd that you should be aware of before investing. 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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