Guangdong Hoshion Industrial Aluminium (SZSE:002824) Is Paying Out Less In Dividends Than Last Year

Guangdong Hoshion Industrial Aluminium Co., Ltd. (SZSE:002824) has announced that on 16th of July, it will be paying a dividend ofCN¥0.1906, which a reduction from last year's comparable dividend. This means that the annual payment is 1.5% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Guangdong Hoshion Industrial Aluminium

Guangdong Hoshion Industrial Aluminium's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Guangdong Hoshion Industrial Aluminium's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 108.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Guangdong Hoshion Industrial Aluminium's Dividend Has Lacked Consistency

Looking back, Guangdong Hoshion Industrial Aluminium's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from CN¥0.0795 total annually to CN¥0.191. 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.

The Dividend Looks Likely To Grow

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. Guangdong Hoshion Industrial Aluminium has seen EPS rising for the last five years, at 73% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Guangdong Hoshion Industrial Aluminium (of which 1 can't be ignored!) you should know about. 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.

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