Beijing Zhong Ke San Huan High-Tech (SZSE:000970) Has Announced That Its Dividend Will Be Reduced To CN¥0.05

Beijing Zhong Ke San Huan High-Tech Co., Ltd.'s (SZSE:000970) dividend is being reduced from last year's payment covering the same period to CN¥0.05 on the 18th of June. Based on this payment, the dividend yield will be 0.6%, which is lower than the average for the industry.

Check out our latest analysis for Beijing Zhong Ke San Huan High-Tech

Beijing Zhong Ke San Huan High-Tech's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Before this announcement, Beijing Zhong Ke San Huan High-Tech was paying out 81% of earnings, but a comparatively small 8.0% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 13% which is fairly sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.10 in 2014, and the most recent fiscal year payment was CN¥0.05. Doing the maths, this is a decline of about 6.7% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though Beijing Zhong Ke San Huan High-Tech's EPS has declined at around 23% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Beijing Zhong Ke San Huan High-Tech's Dividend

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Beijing Zhong Ke San Huan High-Tech that investors should take into consideration. 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.