Zhejiang Jingsheng Mechanical & Electrical (SZSE:300316) Has Announced That It Will Be Increasing Its Dividend To CN¥0.70

The board of Zhejiang Jingsheng Mechanical & Electrical Co., Ltd. (SZSE:300316) has announced that it will be paying its dividend of CN¥0.70 on the 22nd of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 2.1%, which shareholders will be pleased with.

See our latest analysis for Zhejiang Jingsheng Mechanical & Electrical

Zhejiang Jingsheng Mechanical & Electrical's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Zhejiang Jingsheng Mechanical & Electrical was paying only paying out a fraction of earnings, but the payment was a massive 308% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 36.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

Zhejiang Jingsheng Mechanical & Electrical Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was CN¥0.0233, compared to the most recent full-year payment of CN¥0.70. This works out to be a compound annual growth rate (CAGR) of approximately 41% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Zhejiang Jingsheng Mechanical & Electrical has grown earnings per share at 52% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Zhejiang Jingsheng Mechanical & Electrical's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Zhejiang Jingsheng Mechanical & Electrical's payments are rock solid. While Zhejiang Jingsheng Mechanical & Electrical is earning enough to cover the payments, the cash flows are lacking. We don't think Zhejiang Jingsheng Mechanical & Electrical is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Zhejiang Jingsheng Mechanical & Electrical (of which 1 is a bit unpleasant!) you should know about. Is Zhejiang Jingsheng Mechanical & Electrical 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.