Chongqing Sanxia Paints (SZSE:000565) Has Affirmed Its Dividend Of CN¥0.015

The board of Chongqing Sanxia Paints Co., Ltd (SZSE:000565) has announced that it will pay a dividend on the 7th of June, with investors receiving CN¥0.015 per share. Including this payment, the dividend yield on the stock will be 0.3%, which is a modest boost for shareholders' returns.

View our latest analysis for Chongqing Sanxia Paints

Chongqing Sanxia Paints Might Find It Hard To Continue The Dividend

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even in the absence of profits, Chongqing Sanxia Paints is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Looking forward, earnings per share could 26.6% over the next year if the trend of the last few years can't be broken. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was CN¥0.02, compared to the most recent full-year payment of CN¥0.015. Doing the maths, this is a decline of about 2.8% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 27% 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.

Chongqing Sanxia Paints' Dividend Doesn't Look Great

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Chongqing Sanxia Paints that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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