DongGuan Winnerway Industry Zone's (SZSE:000573) Shareholders Will Receive A Smaller Dividend Than Last Year

DongGuan Winnerway Industry Zone LTD.'s (SZSE:000573) dividend is being reduced from last year's payment covering the same period to CN¥0.06 on the 19th of June. This means that the dividend yield is 2.5%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for DongGuan Winnerway Industry Zone

DongGuan Winnerway Industry Zone Doesn't Earn Enough To Cover Its Payments

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

EPS is set to fall by 22.6% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 122%, which is definitely a bit high to be sustainable going forward.

DongGuan Winnerway Industry Zone's Dividend Has Lacked Consistency

DongGuan Winnerway Industry Zone has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the dividend has gone from CN¥0.10 total annually to CN¥0.06. Doing the maths, this is a decline of about 7.0% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. DongGuan Winnerway Industry Zone's earnings per share has shrunk at 23% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

We're Not Big Fans Of DongGuan Winnerway Industry Zone's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for DongGuan Winnerway Industry Zone (2 are a bit concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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