Qingdao Gon Technology (SZSE:002768) Will Pay A Smaller Dividend Than Last Year

Qingdao Gon Technology Co., Ltd. (SZSE:002768) is reducing its dividend to CN¥0.18 on the 29th of Maywhich is 28% less than last year's comparable payment of CN¥0.25. Based on this payment, the dividend yield will be 1.1%, which is lower than the average for the industry.

See our latest analysis for Qingdao Gon Technology

Qingdao Gon Technology's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Qingdao Gon Technology was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 107.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 5.6% by next year, which is in a pretty sustainable range.

Qingdao Gon Technology Doesn't Have A Long Payment History

It is great to see that Qingdao Gon Technology has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the dividend has gone from CN¥0.0667 total annually to CN¥0.25. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Qingdao Gon Technology has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Qingdao Gon Technology Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Qingdao Gon Technology has been growing its earnings per share at 7.9% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Qingdao Gon Technology's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Qingdao Gon Technology 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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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.