Nanjing Hanrui CobaltLtd's (SZSE:300618) Dividend Will Be Reduced To CN¥0.10

Nanjing Hanrui Cobalt Co.,Ltd.'s (SZSE:300618) dividend is being reduced from last year's payment covering the same period to CN¥0.10 on the 13th of June. This means that the dividend yield is 0.4%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for Nanjing Hanrui CobaltLtd

Nanjing Hanrui CobaltLtd's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Nanjing Hanrui CobaltLtd was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 4.3%, which we would be comfortable to see continuing.

Nanjing Hanrui CobaltLtd's Dividend Has Lacked Consistency

Nanjing Hanrui CobaltLtd has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the dividend has gone from CN¥0.446 total annually to CN¥0.10. This works out to a decline of approximately 78% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Nanjing Hanrui CobaltLtd's EPS has declined at around 20% 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. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

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. While Nanjing Hanrui CobaltLtd 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Nanjing Hanrui CobaltLtd (of which 1 is significant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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