Hengdian Group DMEGC Magnetics Ltd (SZSE:002056) Will Pay A Larger Dividend Than Last Year At CN¥0.3884

Hengdian Group DMEGC Magnetics Co. ,Ltd (SZSE:002056) will increase its dividend from last year's comparable payment on the 16th of May to CN¥0.3884. This takes the dividend yield to 2.7%, which shareholders will be pleased with.

See our latest analysis for Hengdian Group DMEGC Magnetics Ltd

Hengdian Group DMEGC Magnetics Ltd's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Hengdian Group DMEGC Magnetics Ltd was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 49.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.025, compared to the most recent full-year payment of CN¥0.39. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Hengdian Group DMEGC Magnetics Ltd has been growing its earnings per share at 19% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Hengdian Group DMEGC Magnetics Ltd's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Hengdian Group DMEGC Magnetics Ltd that investors should take into consideration. Is Hengdian Group DMEGC Magnetics Ltd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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