Hebei Gongda Keya Energy TechnologyLtd (SZSE:301197) Will Pay A Dividend Of CN¥0.10

The board of Hebei Gongda Keya Energy Technology Co.,Ltd. (SZSE:301197) has announced that it will pay a dividend of CN¥0.10 per share on the 11th of July. This means that the annual payment will be 0.8% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Hebei Gongda Keya Energy TechnologyLtd

Hebei Gongda Keya Energy TechnologyLtd's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Hebei Gongda Keya Energy TechnologyLtd'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.

Unless the company can turn things around, EPS could fall by 8.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 21%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Hebei Gongda Keya Energy TechnologyLtd Is Still Building Its Track Record

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. 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.

Dividend Growth Is Doubtful

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Hebei Gongda Keya Energy TechnologyLtd's EPS has declined at around 8.6% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hebei Gongda Keya Energy TechnologyLtd's payments, as there could be some issues with sustaining them into the future. While Hebei Gongda Keya Energy TechnologyLtd is earning enough to cover the payments, the cash flows are lacking. We don't think Hebei Gongda Keya Energy TechnologyLtd 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Hebei Gongda Keya Energy TechnologyLtd (of which 2 are concerning!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com