Sichuan Rongda Gold's (SZSE:001337) Upcoming Dividend Will Be Larger Than Last Year's

Sichuan Rongda Gold Co., Ltd. (SZSE:001337) has announced that it will be increasing its dividend from last year's comparable payment on the 17th of May to CN¥0.25. This takes the annual payment to 0.9% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Sichuan Rongda Gold

Sichuan Rongda Gold'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. Prior to this announcement, Sichuan Rongda Gold was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Unless the company can turn things around, EPS could fall by 32.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 69%, which is definitely feasible to continue.

Sichuan Rongda Gold 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.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Sichuan Rongda Gold's earnings per share has shrunk at 33% a year over the past three years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Sichuan Rongda Gold's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Sichuan Rongda Gold's payments are rock solid. While Sichuan Rongda Gold is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Sichuan Rongda Gold that investors need to be conscious of moving forward. 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.