Shenzhen Topband (SZSE:002139) Has Announced A Dividend Of CN¥0.06

Shenzhen Topband Co., Ltd. (SZSE:002139) will pay a dividend of CN¥0.06 on the 10th of May. Including this payment, the dividend yield on the stock will be 0.6%, which is a modest boost for shareholders' returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Shenzhen Topband's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Shenzhen Topband

Shenzhen Topband's Payment Has Solid Earnings Coverage

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 Topband was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 63.1% over the next year. If the dividend continues on this path, the payout ratio could be 7.9% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CN¥0.0444 in 2014, and the most recent fiscal year payment was CN¥0.06. This implies that the company grew its distributions at a yearly rate of about 3.1% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Shenzhen Topband has impressed us by growing EPS at 16% per year over the past five years. Shenzhen Topband definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Shenzhen Topband's Dividend

Overall, we like to see the dividend staying consistent, and we think Shenzhen Topband might even raise payments in the future. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 9 Shenzhen Topband analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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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.