Ningbo Sunrise Elc TechnologyLtd (SZSE:002937) Will Pay A Larger Dividend Than Last Year At CN¥0.30

Ningbo Sunrise Elc Technology Co.,Ltd (SZSE:002937) will increase its dividend from last year's comparable payment on the 6th of June to CN¥0.30. This will take the annual payment to 2.8% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Ningbo Sunrise Elc TechnologyLtd

Ningbo Sunrise Elc TechnologyLtd's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Ningbo Sunrise Elc TechnologyLtd's dividend was only 41% of earnings, however it was paying out 114% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

The next year is set to see EPS grow by 32.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ningbo Sunrise Elc TechnologyLtd's Dividend Has Lacked Consistency

Ningbo Sunrise Elc TechnologyLtd has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 5 years was CN¥0.188 in 2019, and the most recent fiscal year payment was CN¥0.60. This means that it has been growing its distributions at 26% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Ningbo Sunrise Elc TechnologyLtd has seen EPS rising for the last five years, at 13% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Ningbo Sunrise Elc TechnologyLtd that investors should know about before committing capital to this stock. 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.