Swancor Advanced Materials (SHSE:688585) Will Pay A Dividend Of CN¥0.021

The board of Swancor Advanced Materials Co., Ltd. (SHSE:688585) has announced that it will pay a dividend of CN¥0.021 per share on the 22nd of May. This means the annual payment will be 0.3% of the current stock price, which is lower than the industry average.

View our latest analysis for Swancor Advanced Materials

Swancor Advanced Materials' Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Swancor Advanced Materials' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 21.3% 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 4.7% by next year, which is in a pretty sustainable range.

Swancor Advanced Materials' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 3 years was CN¥0.08 in 2021, and the most recent fiscal year payment was CN¥0.021. The dividend has fallen 74% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. We are encouraged to see that Swancor Advanced Materials has grown earnings per share at 21% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Swancor Advanced Materials' Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Swancor Advanced Materials that investors need to be conscious of moving forward. 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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