Guangzhou Sie Consulting's (SZSE:300687) Dividend Will Be Reduced To CN¥0.11

Guangzhou Sie Consulting Co., Ltd. (SZSE:300687) has announced that on 28th of May, it will be paying a dividend ofCN¥0.11, which a reduction from last year's comparable dividend. This means that the annual payment will be 0.7% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Guangzhou Sie Consulting

Guangzhou Sie Consulting's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Guangzhou Sie Consulting's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 102.7%. If the dividend continues on this path, the payout ratio could be 9.1% by next year, which we think can be pretty sustainable going forward.

Guangzhou Sie Consulting Doesn't Have A Long Payment History

Guangzhou Sie Consulting's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2019, the annual payment back then was CN¥0.0417, compared to the most recent full-year payment of CN¥0.11. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Guangzhou Sie Consulting has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

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 Guangzhou Sie Consulting has grown earnings per share at 19% per year over the past five years. Guangzhou Sie Consulting definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Guangzhou Sie Consulting's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Guangzhou Sie Consulting is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 2 warning signs for Guangzhou Sie Consulting that investors need to be conscious of moving forward. Is Guangzhou Sie Consulting not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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