Sinomine Resource Group (SZSE:002738) Will Pay A Dividend Of CN¥1.00

Sinomine Resource Group Co., Ltd. (SZSE:002738) will pay a dividend of CN¥1.00 on the 30th of May. This means that the annual payment will be 3.1% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Sinomine Resource Group

Sinomine Resource Group's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Sinomine Resource Group's dividend was only 53% of earnings, however it was paying out 417% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 85.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

Sinomine Resource Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was CN¥0.051 in 2015, and the most recent fiscal year payment was CN¥1.00. This works out to be a compound annual growth rate (CAGR) of approximately 39% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Sinomine Resource Group has been growing its earnings per share at 44% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Our Thoughts On Sinomine Resource Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Sinomine Resource Group's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Sinomine Resource Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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