Beijing ConST Instruments Technology's (SZSE:300445) Dividend Will Be Increased To CN¥0.08

The board of Beijing ConST Instruments Technology Inc. (SZSE:300445) has announced that it will be paying its dividend of CN¥0.08 on the 14th of May, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 0.4% is only a modest boost to shareholder returns.

View our latest analysis for Beijing ConST Instruments Technology

Beijing ConST Instruments Technology's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Beijing ConST Instruments Technology's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 72.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 9.5%, which is in the range that makes us comfortable with the sustainability of the dividend.

Beijing ConST Instruments Technology's Dividend Has Lacked Consistency

Looking back, Beijing ConST Instruments Technology's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of CN¥0.0308 in 2015 to the most recent total annual payment of CN¥0.08. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Beijing ConST Instruments Technology has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Beijing ConST Instruments Technology has seen EPS rising for the last five years, at 6.2% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Are management backing themselves to deliver performance? Check their shareholdings in Beijing ConST Instruments Technology in our latest insider ownership analysis. Is Beijing ConST Instruments 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.