Puyang Huicheng Electronic Material (SZSE:300481) Has Announced A Dividend Of CN¥0.40

Puyang Huicheng Electronic Material Co., Ltd. (SZSE:300481) has announced that it will pay a dividend of CN¥0.40 per share on the 21st of May. This means that the annual payment will be 2.6% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Puyang Huicheng Electronic Material

Puyang Huicheng Electronic Material's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Puyang Huicheng Electronic Material's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 83.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Puyang Huicheng Electronic Material's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was CN¥0.167, compared to the most recent full-year payment of CN¥0.40. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Puyang Huicheng Electronic Material has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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. It's encouraging to see that Puyang Huicheng Electronic Material has been growing its earnings per share at 11% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Puyang Huicheng Electronic Material Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Puyang Huicheng Electronic Material might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Puyang Huicheng Electronic Material that investors should know about before committing capital to this stock. Is Puyang Huicheng Electronic Material 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.