Shenzhen Topway Video Communication (SZSE:002238) Is Due To Pay A Dividend Of CN¥0.10

Shenzhen Topway Video Communication Co., Ltd (SZSE:002238) has announced that it will pay a dividend of CN¥0.10 per share on the 20th of June. The dividend yield is 1.2% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Shenzhen Topway Video Communication

Shenzhen Topway Video Communication's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Shenzhen Topway Video Communication was paying out quite a large proportion of both earnings and cash flow, with the dividend being 931% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Looking forward, could fall by 11.2% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 88% in the next 12 months which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was CN¥0.0493, compared to the most recent full-year payment of CN¥0.10. This means that it has been growing its distributions at 7.3% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 11% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Shenzhen Topway Video Communication's Dividend Doesn't Look Sustainable

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

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. Case in point: We've spotted 3 warning signs for Shenzhen Topway Video Communication (of which 1 is a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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