Nanjing Julong Science & TechnologyLTD (SZSE:300644) Is Paying Out A Larger Dividend Than Last Year

The board of Nanjing Julong Science & Technology Co.,LTD (SZSE:300644) has announced that the dividend on 8th of July will be increased to CN¥0.25, which will be 67% higher than last year's payment of CN¥0.15 which covered the same period. Although the dividend is now higher, the yield is only 0.8%, which is below the industry average.

View our latest analysis for Nanjing Julong Science & TechnologyLTD

Nanjing Julong Science & TechnologyLTD's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Nanjing Julong Science & TechnologyLTD's earnings easily covered the dividend, but free cash flows were negative. 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.

If the trend of the last few years continues, EPS will grow by 29.2% over the next 12 months. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Nanjing Julong Science & TechnologyLTD's Dividend Has Lacked Consistency

Looking back, Nanjing Julong Science & TechnologyLTD's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2018, the annual payment back then was CN¥0.177, compared to the most recent full-year payment of CN¥0.15. This works out to be a decline of approximately 2.7% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Nanjing Julong Science & TechnologyLTD has been growing its earnings per share at 29% a year over the past five years. 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.

Our Thoughts On Nanjing Julong Science & TechnologyLTD's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Nanjing Julong Science & TechnologyLTD's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Nanjing Julong Science & TechnologyLTD you should be aware of, and 1 of them makes us a bit uncomfortable. Is Nanjing Julong Science & TechnologyLTD 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.

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