Zhengzhou Qianweiyangchu Food (SZSE:001215) Will Pay A Larger Dividend Than Last Year At CN¥0.19

Zhengzhou Qianweiyangchu Food Co., Ltd. (SZSE:001215) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of June to CN¥0.19. Even though the dividend went up, the yield is still quite low at only 0.6%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Zhengzhou Qianweiyangchu Food's stock price has reduced by 35% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for Zhengzhou Qianweiyangchu Food

Zhengzhou Qianweiyangchu Food's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Zhengzhou Qianweiyangchu Food was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 57.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.7% by next year, which is in a pretty sustainable range.

Zhengzhou Qianweiyangchu Food Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 2 years was CN¥0.15 in 2022, and the most recent fiscal year payment was CN¥0.19. This means that it has been growing its distributions at 13% per annum over that time. Zhengzhou Qianweiyangchu Food has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

We Could See Zhengzhou Qianweiyangchu Food's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Zhengzhou Qianweiyangchu Food has grown earnings per share at 6.4% per year over the past five years. Zhengzhou Qianweiyangchu Food definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

An additional note is that the company has been raising capital by issuing stock equal to 15% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On Zhengzhou Qianweiyangchu Food's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Zhengzhou Qianweiyangchu Food that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com