Dongguan Aohai Technology (SZSE:002993) Will Pay A Larger Dividend Than Last Year At CN¥0.60

Dongguan Aohai Technology Co., Ltd.'s (SZSE:002993) dividend will be increasing from last year's payment of the same period to CN¥0.60 on 6th of June. This takes the dividend yield to 3.4%, which shareholders will be pleased with.

See our latest analysis for Dongguan Aohai Technology

Dongguan Aohai Technology's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last dividend, Dongguan Aohai Technology is earning enough to cover the payment, but then it makes up 153% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 118.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Dongguan Aohai Technology Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2021, the dividend has gone from CN¥0.231 total annually to CN¥1.20. This works out to be a compound annual growth rate (CAGR) of approximately 73% a year over that time. Dongguan Aohai Technology has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Dongguan Aohai Technology has been growing its earnings per share at 20% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Dongguan Aohai Technology could prove to be a strong dividend payer.

Our Thoughts On Dongguan Aohai Technology's Dividend

Overall, we always like to see the dividend being raised, but we don't think Dongguan Aohai Technology will make a great income stock. While Dongguan Aohai Technology is earning enough to cover the payments, the cash flows are lacking. We don't think Dongguan Aohai Technology is a great stock to add to your portfolio if income is your focus.

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. For example, we've picked out 1 warning sign for Dongguan Aohai Technology that investors should know about before committing capital to this stock. Is Dongguan Aohai Technology not quite the opportunity you were looking for? Why not check out our selection of top 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.