Suntront Technology (SZSE:300259) Will Pay A Dividend Of CN¥0.07

Suntront Technology Co., Ltd.'s (SZSE:300259) investors are due to receive a payment of CN¥0.07 per share on 23rd of May. The yield is still above the industry average at 4.6%.

View our latest analysis for Suntront Technology

Suntront Technology'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. Before making this announcement, Suntront Technology was paying out quite a large proportion of both earnings and cash flow, with the dividend being 120% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Earnings per share could rise by 4.5% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 89% which is a bit high but can definitely be sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.0163, compared to the most recent full-year payment of CN¥0.14. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Suntront Technology May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 4.5% a year for the past five years, which isn't massive but still better than seeing them shrink. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Suntront Technology (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.