Shenzhen Forms Syntron Information (SZSE:300468) Has Affirmed Its Dividend Of CN¥0.06

Shenzhen Forms Syntron Information Co., Ltd. (SZSE:300468) has announced that it will pay a dividend of CN¥0.06 per share on the 7th of June. This payment means that the dividend yield will be 0.8%, which is around the industry average.

Check out our latest analysis for Shenzhen Forms Syntron Information

Shenzhen Forms Syntron Information's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Shenzhen Forms Syntron Information was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 7.0% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 73%, which is definitely feasible to continue.

Shenzhen Forms Syntron Information Is Still Building Its Track Record

It is great to see that Shenzhen Forms Syntron Information has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the annual payment back then was CN¥0.0318, compared to the most recent full-year payment of CN¥0.06. This means that it has been growing its distributions at 8.3% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Shenzhen Forms Syntron Information to be a consistent dividend paying stock.

Dividend Growth Is Doubtful

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Shenzhen Forms Syntron Information's EPS has declined at around 7.0% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Shenzhen Forms Syntron Information's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Shenzhen Forms Syntron Information has 2 warning signs (and 1 which is a bit unpleasant) we think 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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