Sichuan Newsnet Media (Group)Ltd's (SZSE:300987) Shareholders Will Receive A Bigger Dividend Than Last Year

Sichuan Newsnet Media (Group) Co.,Ltd. (SZSE:300987) has announced that it will be increasing its dividend from last year's comparable payment on the 13th of June to CN¥0.17. Despite this raise, the dividend yield of 1.4% is only a modest boost to shareholder returns.

View our latest analysis for Sichuan Newsnet Media (Group)Ltd

Sichuan Newsnet Media (Group)Ltd Is Paying Out More Than It Is Earning

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, the company was paying out 116% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to fall by 20.9% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 149%, which could put the dividend in jeopardy if the company's earnings don't improve.

Sichuan Newsnet Media (Group)Ltd 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. Since 2022, the annual payment back then was CN¥0.154, compared to the most recent full-year payment of CN¥0.17. This implies that the company grew its distributions at a yearly rate of about 5.1% over that duration. Sichuan Newsnet Media (Group)Ltd has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Sichuan Newsnet Media (Group)Ltd's EPS has declined at around 21% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

We're Not Big Fans Of Sichuan Newsnet Media (Group)Ltd's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. 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. Case in point: We've spotted 3 warning signs for Sichuan Newsnet Media (Group)Ltd (of which 2 are a bit unpleasant!) 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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