Sichuan Tianyi Comheart Telecom's (SZSE:300504) Dividend Will Be CN¥0.20

The board of Sichuan Tianyi Comheart Telecom Co., Ltd. (SZSE:300504) has announced that it will pay a dividend on the 31st of May, with investors receiving CN¥0.20 per share. This makes the dividend yield 1.5%, which will augment investor returns quite nicely.

See our latest analysis for Sichuan Tianyi Comheart Telecom

Sichuan Tianyi Comheart Telecom'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, Sichuan Tianyi Comheart Telecom was paying out quite a large proportion of both earnings and cash flow, with the dividend being 216% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Sichuan Tianyi Comheart Telecom Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 6 years was CN¥0.15 in 2018, and the most recent fiscal year payment was CN¥0.20. This means that it has been growing its distributions at 4.9% per annum over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Earnings per share has been sinking by 18% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Sichuan Tianyi Comheart Telecom's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Sichuan Tianyi Comheart Telecom (of which 1 doesn't sit too well with us!) you should know about. 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.