Guangdong Kitech New Material HoldingLtd (SZSE:300995) Is Due To Pay A Dividend Of CN¥0.12

Guangdong Kitech New Material Holding Co.,Ltd. (SZSE:300995) has announced that it will pay a dividend of CN¥0.12 per share on the 13th of June. This means the annual payment will be 0.6% of the current stock price, which is lower than the industry average.

See our latest analysis for Guangdong Kitech New Material HoldingLtd

Guangdong Kitech New Material HoldingLtd Is Paying Out More Than It Is Earning

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, the dividend made up 98% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.

If the company can't turn things around, EPS could fall by 29.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 167%, which could put the dividend under pressure if earnings don't start to improve.

Guangdong Kitech New Material HoldingLtd's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 3 years was CN¥0.52 in 2021, and the most recent fiscal year payment was CN¥0.10. This works out to a decline of approximately 81% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Guangdong Kitech New Material HoldingLtd's EPS has fallen by approximately 30% per year during the past five years. 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.

We're Not Big Fans Of Guangdong Kitech New Material HoldingLtd's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Guangdong Kitech New Material HoldingLtd make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for Guangdong Kitech New Material HoldingLtd you should be aware of, and 3 of them are potentially serious. Is Guangdong Kitech New Material HoldingLtd 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.