Zhejiang Zhengguang Industrial's (SZSE:301092) Upcoming Dividend Will Be Larger Than Last Year's

Zhejiang Zhengguang Industrial Co., Ltd. (SZSE:301092) will increase its dividend from last year's comparable payment on the 19th of June to CN¥0.26. Despite this raise, the dividend yield of 1.1% is only a modest boost to shareholder returns.

Check out our latest analysis for Zhejiang Zhengguang Industrial

Zhejiang Zhengguang Industrial's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Zhejiang Zhengguang Industrial is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 9.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 4.0%, which is in the range that makes us comfortable with the sustainability of the dividend.

Zhejiang Zhengguang Industrial 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 dividend has gone from an annual total of CN¥0.12 in 2022 to the most recent total annual payment of CN¥0.26. This means that it has been growing its distributions at 47% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

We Could See Zhejiang Zhengguang Industrial's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. Zhejiang Zhengguang Industrial has seen EPS rising for the last five years, at 9.0% per annum. Zhejiang Zhengguang Industrial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Zhejiang Zhengguang Industrial's Dividend

Overall, we always like to see the dividend being raised, but we don't think Zhejiang Zhengguang Industrial will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Zhejiang Zhengguang Industrial you should be aware of, and 2 of them don't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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