Ningbo Yongxin OpticsLtd's (SHSE:603297) Dividend Will Be Reduced To CN¥0.955

Ningbo Yongxin Optics Co.,Ltd (SHSE:603297) is reducing its dividend from last year's comparable payment to CN¥0.955 on the 6th of June. This means that the annual payment is 1.4% of the current stock price, which is lower than what the rest of the industry is paying.

View our latest analysis for Ningbo Yongxin OpticsLtd

Ningbo Yongxin OpticsLtd's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Ningbo Yongxin OpticsLtd's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

The next year is set to see EPS grow by 109.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ningbo Yongxin OpticsLtd Doesn't Have A Long Payment History

It is great to see that Ningbo Yongxin OpticsLtd 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. The annual payment during the last 5 years was CN¥0.385 in 2019, and the most recent fiscal year payment was CN¥0.955. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

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. It's encouraging to see that Ningbo Yongxin OpticsLtd has been growing its earnings per share at 11% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Ningbo Yongxin OpticsLtd is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Ningbo Yongxin OpticsLtd you should be aware of, and 1 of them doesn't sit too well with us. 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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