Wens Foodstuff Group's (SZSE:300498) Shareholders Will Receive A Smaller Dividend Than Last Year

Wens Foodstuff Group Co., Ltd. (SZSE:300498) has announced that on 19th of June, it will be paying a dividend ofCN¥0.10, which a reduction from last year's comparable dividend. This means that the annual payment is 0.5% of the current stock price, which is lower than what the rest of the industry is paying.

View our latest analysis for Wens Foodstuff Group

Wens Foodstuff Group's Distributions May Be Difficult To Sustain

Even a low dividend yield can be attractive if it is sustained for years on end. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.

Over the next year, EPS is forecast to expand by 74.6%. The company seems to be going down the right path, but it will take a little bit longer than a year to cross over into profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Wens Foodstuff Group's Dividend Has Lacked Consistency

It's comforting to see that Wens Foodstuff Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of CN¥0.289 in 2016 to the most recent total annual payment of CN¥0.10. Dividend payments have fallen sharply, down 65% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Earnings per share has been sinking by 38% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Wens Foodstuff Group's Dividend Doesn't Look Great

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Wens Foodstuff Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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