Shenzhen Sunlord ElectronicsLtd's (SZSE:002138) Shareholders Will Receive A Bigger Dividend Than Last Year

Shenzhen Sunlord Electronics Co.,Ltd.'s (SZSE:002138) dividend will be increasing from last year's payment of the same period to CN¥0.30 on 29th of March. Despite this raise, the dividend yield of 1.2% is only a modest boost to shareholder returns.

Check out our latest analysis for Shenzhen Sunlord ElectronicsLtd

Shenzhen Sunlord ElectronicsLtd's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Shenzhen Sunlord ElectronicsLtd was paying a whopping 544% as a dividend, but this only made up 37% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 113.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from CN¥0.10 total annually to CN¥0.30. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

We Could See Shenzhen Sunlord ElectronicsLtd's Dividend Growing

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. We are encouraged to see that Shenzhen Sunlord ElectronicsLtd has grown earnings per share at 6.5% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Shenzhen Sunlord ElectronicsLtd's payments are rock solid. While Shenzhen Sunlord ElectronicsLtd is earning enough to cover the payments, the cash flows are lacking. We don't think Shenzhen Sunlord ElectronicsLtd 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. As an example, we've identified 2 warning signs for Shenzhen Sunlord ElectronicsLtd that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.