Guangdong Yantang Dairy's (SZSE:002732) Dividend Is Being Reduced To CN¥0.15

Guangdong Yantang Dairy Co., Ltd.'s (SZSE:002732) dividend is being reduced from last year's payment covering the same period to CN¥0.15 on the 20th of June. This payment takes the dividend yield to 1.0%, which only provides a modest boost to overall returns.

See our latest analysis for Guangdong Yantang Dairy

Guangdong Yantang Dairy'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. Before making this announcement, Guangdong Yantang Dairy was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 17.6%. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.

Guangdong Yantang Dairy's Dividend Has Lacked Consistency

It's comforting to see that Guangdong Yantang Dairy has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2015, the dividend has gone from CN¥0.20 total annually to CN¥0.15. The dividend has shrunk at around 3.1% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Guangdong Yantang Dairy has seen EPS rising for the last five years, at 31% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Guangdong Yantang Dairy Looks Like A Great Dividend Stock

Overall, we think that Guangdong Yantang Dairy could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 2 warning signs for Guangdong Yantang Dairy that investors need to be conscious of moving forward. Is Guangdong Yantang Dairy 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.

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