Suntak TechnologyLtd (SZSE:002815) Is Reducing Its Dividend To CN¥0.20

Suntak Technology Co.,Ltd. (SZSE:002815) is reducing its dividend from last year's comparable payment to CN¥0.20 on the 24th of May. The yield is still above the industry average at 2.3%.

View our latest analysis for Suntak TechnologyLtd

Suntak TechnologyLtd's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Suntak TechnologyLtd's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 12.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 73%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Suntak TechnologyLtd's Dividend Has Lacked Consistency

Suntak TechnologyLtd has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of CN¥0.225 in 2017 to the most recent total annual payment of CN¥0.20. The dividend has shrunk at around 1.7% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Suntak TechnologyLtd's earnings per share has shrunk at 13% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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.

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. Taking the debate a bit further, we've identified 2 warning signs for Suntak TechnologyLtd that investors need to be conscious of moving forward. Is Suntak TechnologyLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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