Jiangsu Huaxin New MaterialLtd (SZSE:300717) Will Pay A Dividend Of CN¥0.20

Jiangsu Huaxin New Material Co.,Ltd. (SZSE:300717) has announced that it will pay a dividend of CN¥0.20 per share on the 19th of June. This means the annual payment will be 1.3% of the current stock price, which is lower than the industry average.

View our latest analysis for Jiangsu Huaxin New MaterialLtd

Jiangsu Huaxin New MaterialLtd's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite comfortably covered by Jiangsu Huaxin New MaterialLtd's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Unless the company can turn things around, EPS could fall by 1.9% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 48%, which is definitely feasible to continue.

Jiangsu Huaxin New MaterialLtd's Dividend Has Lacked Consistency

It's comforting to see that Jiangsu Huaxin New MaterialLtd has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2018, the dividend has gone from CN¥0.125 total annually to CN¥0.20. This works out to be a compound annual growth rate (CAGR) of approximately 8.1% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Jiangsu Huaxin New MaterialLtd might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

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. However, Jiangsu Huaxin New MaterialLtd's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Jiangsu Huaxin New MaterialLtd's payments, as there could be some issues with sustaining them into the future. While Jiangsu Huaxin New MaterialLtd is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

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. Just as an example, we've come across 2 warning signs for Jiangsu Huaxin New MaterialLtd you should be aware of, and 1 of them is a bit unpleasant. 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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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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