Hangzhou Yitong New Material (SZSE:300930) Has Announced A Dividend Of CN¥0.10

The board of Hangzhou Yitong New Material Co., LTD (SZSE:300930) has announced that it will pay a dividend on the 28th of May, with investors receiving CN¥0.10 per share. Including this payment, the dividend yield on the stock will be 0.5%, which is a modest boost for shareholders' returns.

View our latest analysis for Hangzhou Yitong New Material

Hangzhou Yitong New Material's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Hangzhou Yitong New Material 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.

Looking forward, EPS could fall by 4.3% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 23%, which is definitely feasible to continue.

Hangzhou Yitong New Material Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The payments haven't really changed that much since 3 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. In the last five years, Hangzhou Yitong New Material's earnings per share has shrunk at approximately 4.3% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hangzhou Yitong New Material's payments, as there could be some issues with sustaining them into the future. While Hangzhou Yitong New Material is earning enough to cover the payments, the cash flows are lacking. We don't think Hangzhou Yitong New Material is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Hangzhou Yitong New Material has 4 warning signs (and 3 which make us uncomfortable) we think 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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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.