Henan Shenhuo Coal Industary and Electricity Power (SZSE:000933) Is Reducing Its Dividend To CN¥0.80

Henan Shenhuo Coal Industary and Electricity Power Corporation Limited's (SZSE:000933) dividend is being reduced from last year's payment covering the same period to CN¥0.80 on the 16th of May. The dividend yield of 3.4% is still a nice boost to shareholder returns, despite the cut.

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 Henan Shenhuo Coal Industary and Electricity Power'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.

Check out our latest analysis for Henan Shenhuo Coal Industary and Electricity Power

Henan Shenhuo Coal Industary and Electricity Power's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Henan Shenhuo Coal Industary and Electricity Power's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 24.6% over the next year. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CN¥0.03 in 2014, and the most recent fiscal year payment was CN¥0.80. 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Henan Shenhuo Coal Industary and Electricity Power has seen EPS rising for the last five years, at 92% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Henan Shenhuo Coal Industary and Electricity Power's Dividend

Overall, we think that Henan Shenhuo Coal Industary and Electricity Power could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Henan Shenhuo Coal Industary and Electricity Power that investors need to be conscious of moving forward. Is Henan Shenhuo Coal Industary and Electricity Power 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.