AVIC Jonhon Optronic TechnologyLtd (SZSE:002179) Will Pay A Larger Dividend Than Last Year At CN¥0.60

The board of AVIC Jonhon Optronic Technology Co.,Ltd. (SZSE:002179) has announced that it will be paying its dividend of CN¥0.60 on the 21st of May, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 1.6%, which is in line with the average for the industry.

View our latest analysis for AVIC Jonhon Optronic TechnologyLtd

AVIC Jonhon Optronic TechnologyLtd's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, AVIC Jonhon Optronic TechnologyLtd's dividend was only 40% of earnings, however it was paying out 120% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 68.9% over the next year. If the dividend continues on this path, the payout ratio could be 32% 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 dividend has gone from an annual total of CN¥0.05 in 2014 to the most recent total annual payment of CN¥0.60. This means that it has been growing its distributions at 28% per annum 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 AVIC Jonhon Optronic TechnologyLtd has been growing its earnings per share at 22% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think AVIC Jonhon Optronic TechnologyLtd's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for AVIC Jonhon Optronic TechnologyLtd that investors should know about before committing capital to this stock. 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.