Rianlon's (SZSE:300596) Dividend Will Be CN¥0.344

Rianlon Corporation (SZSE:300596) has announced that it will pay a dividend of CN¥0.344 per share on the 2nd of July. This payment means the dividend yield will be 1.3%, which is below the average for the industry.

View our latest analysis for Rianlon

Rianlon's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Rianlon was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 81.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% by next year, which is in a pretty sustainable range.

Rianlon Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2017, the annual payment back then was CN¥0.07, compared to the most recent full-year payment of CN¥0.344. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Rianlon has impressed us by growing EPS at 7.6% per year over the past five years. Rianlon definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Rianlon's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Rianlon's payments, as there could be some issues with sustaining them into the future. While Rianlon is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Rianlon 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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