Shenzhen Keanda Electronic Technology's (SZSE:002972) Dividend Will Be Reduced To CN¥0.30

Shenzhen Keanda Electronic Technology Corp., Ltd. (SZSE:002972) has announced that on 28th of May, it will be paying a dividend ofCN¥0.30, which a reduction from last year's comparable dividend. The yield is still above the industry average at 4.4%.

Check out our latest analysis for Shenzhen Keanda Electronic Technology

Shenzhen Keanda Electronic Technology Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

If the company can't turn things around, EPS could fall by 14.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 145%, which could put the dividend under pressure if earnings don't start to improve.

Shenzhen Keanda Electronic Technology Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2020, the dividend has gone from CN¥0.107 total annually to CN¥0.429. This means that it has been growing its distributions at 41% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Shenzhen Keanda Electronic Technology's EPS has fallen by approximately 15% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Shenzhen Keanda Electronic Technology's Dividend Doesn't Look Great

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Shenzhen Keanda Electronic Technology has 3 warning signs (and 1 which is a bit concerning) we think you should know about. Is Shenzhen Keanda Electronic Technology not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.