Tianshui Zhongxing Bio-technologyLtd (SZSE:002772) Has Affirmed Its Dividend Of CN¥0.30

Tianshui Zhongxing Bio-technology Co.,Ltd. (SZSE:002772) will pay a dividend of CN¥0.30 on the 16th of May. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.

Check out our latest analysis for Tianshui Zhongxing Bio-technologyLtd

Tianshui Zhongxing Bio-technologyLtd's Distributions May Be Difficult To Sustain

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Tianshui Zhongxing Bio-technologyLtd isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Looking forward, earnings per share could rise by 13.5% over the next year if the trend from the last few years continues. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.

Tianshui Zhongxing Bio-technologyLtd Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 8 years was CN¥0.0536 in 2016, and the most recent fiscal year payment was CN¥0.30. This means that it has been growing its distributions at 24% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Company Could Face Some Challenges Growing The Dividend

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 Tianshui Zhongxing Bio-technologyLtd has grown earnings per share at 13% per year over the past five years. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tianshui Zhongxing Bio-technologyLtd's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Tianshui Zhongxing Bio-technologyLtd that investors should take into consideration. Is Tianshui Zhongxing Bio-technologyLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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