Yantai Changyu Pioneer Wine's (SZSE:000869) Dividend Will Be Increased To CN¥0.5042

Yantai Changyu Pioneer Wine Company Limited (SZSE:000869) will increase its dividend from last year's comparable payment on the 17th of June to CN¥0.5042. This takes the annual payment to 2.2% of the current stock price, which is about average for the industry.

View our latest analysis for Yantai Changyu Pioneer Wine

Yantai Changyu Pioneer Wine's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last payment made up 83% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 69.2% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 48% which brings it into quite a comfortable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CN¥1.10 in 2014 to the most recent total annual payment of CN¥0.50. This works out to be a decline of approximately 7.6% 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 Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though Yantai Changyu Pioneer Wine's EPS has declined at around 17% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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 becomes a long term trend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Yantai Changyu Pioneer Wine that investors should take into consideration. Is Yantai Changyu Pioneer Wine 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.