Inner Mongolia OJing Science & Technology (SZSE:001269) Is Increasing Its Dividend To CN¥1.2

Inner Mongolia OJing Science & Technology Co., Ltd.'s (SZSE:001269) dividend will be increasing from last year's payment of the same period to CN¥1.2 on 17th of June. This makes the dividend yield 3.6%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Inner Mongolia OJing Science & Technology's stock price has reduced by 34% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for Inner Mongolia OJing Science & Technology

Inner Mongolia OJing Science & Technology's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Inner Mongolia OJing Science & Technology's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 40.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

Inner Mongolia OJing Science & Technology Is Still Building Its Track Record

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Inner Mongolia OJing Science & Technology has grown earnings per share at 44% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Inner Mongolia OJing Science & Technology could prove to be a strong dividend payer.

Our Thoughts On Inner Mongolia OJing Science & Technology's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Inner Mongolia OJing Science & Technology is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for Inner Mongolia OJing Science & Technology (of which 1 can't be ignored!) you should know about. Is Inner Mongolia OJing Science & Technology 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.