Anji Foodstuff (SHSE:603696) Is Paying Out A Larger Dividend Than Last Year

Anji Foodstuff Co., Ltd's (SHSE:603696) dividend will be increasing from last year's payment of the same period to CN¥0.075 on 24th of June. Even though the dividend went up, the yield is still quite low at only 1.1%.

See our latest analysis for Anji Foodstuff

Anji Foodstuff'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. Prior to this announcement, Anji Foodstuff's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 144% 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.

Looking forward, could fall by 10.3% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 78%, which is definitely on the higher side.

Anji Foodstuff's Dividend Has Lacked Consistency

Anji Foodstuff has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the annual payment back then was CN¥0.0765, compared to the most recent full-year payment of CN¥0.075. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 10% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Anji Foodstuff is earning enough to cover the payments, the cash flows are lacking. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Anji Foodstuff has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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