Shandong HaihuaLtd (SZSE:000822) Has Announced A Dividend Of CN¥0.10

The board of Shandong Haihua Co.,Ltd (SZSE:000822) has announced that it will pay a dividend on the 15th of May, with investors receiving CN¥0.10 per share. Including this payment, the dividend yield on the stock will be 1.4%, which is a modest boost for shareholders' returns.

View our latest analysis for Shandong HaihuaLtd

Shandong HaihuaLtd's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Shandong HaihuaLtd'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.

If the trend of the last few years continues, EPS will grow by 12.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 8.2% by next year, which we think can be pretty sustainable going forward.

Shandong HaihuaLtd's Dividend Has Lacked Consistency

Shandong HaihuaLtd has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the annual payment back then was CN¥0.05, compared to the most recent full-year payment of CN¥0.10. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Shandong HaihuaLtd has been growing its earnings per share at 12% a year over the past five years. Shandong HaihuaLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Shandong HaihuaLtd is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Shandong HaihuaLtd (1 is a bit unpleasant!) 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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