Jiangsu Changbao SteeltubeLtd's (SZSE:002478) Upcoming Dividend Will Be Larger Than Last Year's

Jiangsu Changbao Steeltube Co.,Ltd (SZSE:002478) will increase its dividend from last year's comparable payment on the 24th of May to CN¥0.28. This makes the dividend yield 4.5%, which is above the industry average.

See our latest analysis for Jiangsu Changbao SteeltubeLtd

Jiangsu Changbao SteeltubeLtd's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Jiangsu Changbao SteeltubeLtd was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 12.4% over the next year. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.09, compared to the most recent full-year payment of CN¥0.28. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Jiangsu Changbao SteeltubeLtd has seen EPS rising for the last five years, at 7.8% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Jiangsu Changbao SteeltubeLtd's prospects of growing its dividend payments in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Jiangsu Changbao SteeltubeLtd will make a great income stock. While Jiangsu Changbao SteeltubeLtd is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Jiangsu Changbao SteeltubeLtd you should be aware of, and 1 of them doesn't sit too well with us. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.