Transfar Zhilian (SZSE:002010) Is Paying Out A Dividend Of CN¥0.10

Transfar Zhilian Co., Ltd.'s (SZSE:002010) investors are due to receive a payment of CN¥0.10 per share on 24th of June. Based on this payment, the dividend yield will be 2.4%, which is fairly typical for the industry.

View our latest analysis for Transfar Zhilian

Transfar Zhilian's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Transfar Zhilian's dividend was only 47% of earnings, however it was paying out 1,338% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to expand by 53.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Transfar Zhilian's Dividend Has Lacked Consistency

Transfar Zhilian 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. The last annual payment of CN¥0.10 was flat on the annual payment from8 years ago. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Transfar Zhilian's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Transfar Zhilian's Dividend Doesn't Look Sustainable

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

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Transfar Zhilian has 3 warning signs (and 1 which is concerning) we think you should know about. Is Transfar Zhilian not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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