Shanxi Yongdong Chemistry Industry's (SZSE:002753) Dividend Will Be Increased To CN¥0.137

Shanxi Yongdong Chemistry Industry Co., Ltd. (SZSE:002753) will increase its dividend from last year's comparable payment on the 26th of June to CN¥0.137. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

See our latest analysis for Shanxi Yongdong Chemistry Industry

Shanxi Yongdong Chemistry Industry's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Shanxi Yongdong Chemistry Industry's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 10.9% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 43%, which is definitely feasible to continue.

Shanxi Yongdong Chemistry Industry's Dividend Has Lacked Consistency

It's comforting to see that Shanxi Yongdong Chemistry Industry has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of CN¥0.0533 in 2016 to the most recent total annual payment of CN¥0.137. This means that it has been growing its distributions at 13% per annum over that time. 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.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Shanxi Yongdong Chemistry Industry's EPS has declined at around 11% a year. 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.

Our Thoughts On Shanxi Yongdong Chemistry Industry's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Shanxi Yongdong Chemistry Industry's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Shanxi Yongdong Chemistry Industry is a great stock to add to your portfolio if income is your focus.

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 Shanxi Yongdong Chemistry Industry you should be aware of, and 1 of them shouldn't be ignored. Is Shanxi Yongdong Chemistry Industry not quite the opportunity you were looking for? Why not check out our selection of top 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.

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