Hunan Sundy Science and Technology's (SZSE:300515) Shareholders Will Receive A Smaller Dividend Than Last Year

Hunan Sundy Science and Technology Co., Ltd.'s (SZSE:300515) dividend is being reduced from last year's payment covering the same period to CN¥0.145 on the 30th of May. The dividend yield will be in the average range for the industry at 1.4%.

Check out our latest analysis for Hunan Sundy Science and Technology

Hunan Sundy Science and Technology's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Hunan Sundy Science and Technology's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 8.5% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.

Hunan Sundy Science and Technology's Dividend Has Lacked Consistency

Hunan Sundy Science and Technology has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the annual payment back then was CN¥0.10, compared to the most recent full-year payment of CN¥0.145. This implies that the company grew its distributions at a yearly rate of about 5.5% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Hunan Sundy Science and Technology might have put its house in order since then, but we remain cautious.

We Could See Hunan Sundy Science and Technology's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Hunan Sundy Science and Technology has grown earnings per share at 8.5% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Hunan Sundy Science and Technology's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Hunan Sundy Science and Technology has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Hunan Sundy Science and Technology that you should be aware of before investing. Is Hunan Sundy Science and Technology not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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