Baowu Magnesium Technology (SZSE:002182) Is Paying Out A Larger Dividend Than Last Year

Baowu Magnesium Technology Co., Ltd. (SZSE:002182) will increase its dividend from last year's comparable payment on the 14th of June to CN¥0.13. Even though the dividend went up, the yield is still quite low at only 0.7%.

See our latest analysis for Baowu Magnesium Technology

Baowu Magnesium Technology's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Baowu Magnesium Technology 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.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 9.5%, so there isn't too much pressure on the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.05 in 2014, and the most recent fiscal year payment was CN¥0.13. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Baowu Magnesium Technology hasn't seen much change in its earnings per share over the last five years.

Baowu Magnesium Technology's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Baowu Magnesium Technology will make a great income stock. While Baowu Magnesium Technology 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for Baowu Magnesium Technology you should be aware of, and 2 of them make us uncomfortable. 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.