Zhejiang Realsun ChemicalLtd (SZSE:301212) Will Pay A Smaller Dividend Than Last Year

Zhejiang Realsun Chemical Co.,Ltd.'s (SZSE:301212) dividend is being reduced from last year's payment covering the same period to CN¥0.198 on the 7th of June. Based on this payment, the dividend yield will be 0.9%, which is lower than the average for the industry.

Check out our latest analysis for Zhejiang Realsun ChemicalLtd

Zhejiang Realsun ChemicalLtd'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, Zhejiang Realsun ChemicalLtd's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

EPS is set to fall by 2.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 55%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Zhejiang Realsun ChemicalLtd's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2022, the dividend has gone from CN¥0.205 total annually to CN¥0.198. Doing the maths, this is a decline of about 1.7% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

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. In the last five years, Zhejiang Realsun ChemicalLtd's earnings per share has shrunk at approximately 2.8% 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

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Zhejiang Realsun ChemicalLtd is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Zhejiang Realsun ChemicalLtd (of which 2 can't be ignored!) you should know about. Is Zhejiang Realsun ChemicalLtd 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.