Jiangsu Maysta Chemical (SHSE:603041) Will Pay A Larger Dividend Than Last Year At CN¥0.20

Jiangsu Maysta Chemical Co., Ltd. (SHSE:603041) will increase its dividend from last year's comparable payment on the 12th of June to CN¥0.20. This takes the annual payment to 1.9% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Jiangsu Maysta Chemical

Jiangsu Maysta Chemical's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Jiangsu Maysta Chemical's earnings easily covered the dividend, but free cash flows were negative. 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 could rise by 14.3% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

Jiangsu Maysta Chemical's Dividend Has Lacked Consistency

It's comforting to see that Jiangsu Maysta Chemical 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. The dividend has gone from an annual total of CN¥0.114 in 2018 to the most recent total annual payment of CN¥0.20. This means that it has been growing its distributions at 9.8% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Jiangsu Maysta Chemical might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Jiangsu Maysta Chemical has grown earnings per share at 14% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Jiangsu Maysta Chemical's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Jiangsu Maysta Chemical is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Jiangsu Maysta Chemical (of which 1 is potentially serious!) you should know about. Is Jiangsu Maysta Chemical 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.