Zhejiang Bofay Electric's (SZSE:001255) Dividend Is Being Reduced To CN¥0.086

Zhejiang Bofay Electric Co., Ltd.'s (SZSE:001255) dividend is being reduced by 67% to CN¥0.086 per share on 29th of May, in comparison to last year's comparable payment of CN¥0.26. Based on this payment, the dividend yield will be 1.0%, which is lower than the average for the industry.

Check out our latest analysis for Zhejiang Bofay Electric

Zhejiang Bofay Electric's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Zhejiang Bofay Electric is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Unless the company can turn things around, EPS could fall by 1.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 7.0%, which is definitely feasible to continue.

Zhejiang Bofay Electric Is Still Building Its Track Record

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Unfortunately, Zhejiang Bofay Electric's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Zhejiang Bofay Electric's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Zhejiang Bofay Electric is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Zhejiang Bofay Electric has 4 warning signs (and 1 which is a bit concerning) we think you should know about. Is Zhejiang Bofay Electric 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.