Yunnan CopperLtd's (SZSE:000878) Dividend Is Being Reduced To CN¥0.30

Yunnan Copper Co.,Ltd (SZSE:000878) is reducing its dividend from last year's comparable payment to CN¥0.30 on the 23rd of May. Based on this payment, the dividend yield will be 1.9%, which is lower than the average for the industry.

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 Yunnan CopperLtd's stock price has increased by 43% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Yunnan CopperLtd

Yunnan CopperLtd's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Yunnan CopperLtd was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 59.1% over the next year. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Yunnan CopperLtd's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The dividend has gone from an annual total of CN¥0.10 in 2021 to the most recent total annual payment of CN¥0.30. This implies that the company grew its distributions at a yearly rate of about 44% over that duration. Yunnan CopperLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Yunnan CopperLtd has seen EPS rising for the last five years, at 43% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Yunnan CopperLtd has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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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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.