Shenzhen Jieshun Science and Technology IndustryLtd (SZSE:002609) Is Increasing Its Dividend To CN¥0.125

The board of Shenzhen Jieshun Science and Technology Industry Co.,Ltd. (SZSE:002609) has announced that it will be paying its dividend of CN¥0.125 on the 5th of June, an increased payment from last year's comparable dividend. This takes the annual payment to 1.6% of the current stock price, which is about average for the industry.

See our latest analysis for Shenzhen Jieshun Science and Technology IndustryLtd

Shenzhen Jieshun Science and Technology IndustryLtd's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last payment made up 71% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 170.8%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

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¥0.0229, compared to the most recent full-year payment of CN¥0.125. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Shenzhen Jieshun Science and Technology IndustryLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Shenzhen Jieshun Science and Technology IndustryLtd hasn't seen much change in its earnings per share over the last five years. Shenzhen Jieshun Science and Technology IndustryLtd's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Our Thoughts On Shenzhen Jieshun Science and Technology IndustryLtd's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Shenzhen Jieshun Science and Technology IndustryLtd that you should be aware of before investing. 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.