Changzhou Almaden (SZSE:002623) Has Announced That It Will Be Increasing Its Dividend To CN¥0.50

Changzhou Almaden Co., Ltd.'s (SZSE:002623) dividend will be increasing from last year's payment of the same period to CN¥0.50 on 28th of May. This will take the dividend yield to an attractive 2.5%, providing a nice boost to shareholder returns.

View our latest analysis for Changzhou Almaden

Changzhou Almaden's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Over the next year, EPS is forecast to expand by 180.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CN¥0.04 in 2014, and the most recent fiscal year payment was CN¥0.50. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Changzhou Almaden has been growing its earnings per share at 5.8% a year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Changzhou Almaden's payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

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. To that end, Changzhou Almaden has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Changzhou Almaden not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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