Stock Analysis

Inner Mongolia Yuan Xing Energy's (SZSE:000683) Dividend Will Be Increased To CN¥0.30

SZSE:000683
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The board of Inner Mongolia Yuan Xing Energy Company Limited (SZSE:000683) has announced that it will be paying its dividend of CN¥0.30 on the 30th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 3.9%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Inner Mongolia Yuan Xing Energy's stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Inner Mongolia Yuan Xing Energy

Inner Mongolia Yuan Xing Energy's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. Generally, we think that this would be a risky long term practice.

The next year is set to see EPS grow by 159.0%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 39% which would be quite comfortable going to take the dividend forward.

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SZSE:000683 Historic Dividend May 24th 2024

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.0111 in 2014, and the most recent fiscal year payment was CN¥0.30. This means that it has been growing its distributions at 39% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Inner Mongolia Yuan Xing Energy May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 3.5% per year. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Inner Mongolia Yuan Xing Energy will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 3 warning signs for Inner Mongolia Yuan Xing Energy that investors should take into consideration. Is Inner Mongolia Yuan Xing Energy 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.