Zhejiang Kan Specialities Material (SZSE:002012) Will Pay A Larger Dividend Than Last Year At CN¥0.031

Zhejiang Kan Specialities Material Co., Ltd. (SZSE:002012) will increase its dividend from last year's comparable payment on the 24th of May to CN¥0.031. Although the dividend is now higher, the yield is only 0.7%, which is below the industry average.

View our latest analysis for Zhejiang Kan Specialities Material

Zhejiang Kan Specialities Material Doesn't Earn Enough To Cover Its Payments

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, the dividend made up 385% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

EPS is set to fall by 27.4% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 467%, which could put the dividend in jeopardy if the company's earnings don't improve.

Zhejiang Kan Specialities Material's Dividend Has Lacked Consistency

Looking back, Zhejiang Kan Specialities Material's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2017, the annual payment back then was CN¥0.02, compared to the most recent full-year payment of CN¥0.031. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Zhejiang Kan Specialities Material's EPS has fallen by approximately 27% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

We're Not Big Fans Of Zhejiang Kan Specialities Material's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Zhejiang Kan Specialities Material has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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