Chengdu Jiafaantai Education TechnologyLtd (SZSE:300559) Is Increasing Its Dividend To CN¥0.15

Chengdu Jiafaantai Education Technology Co.,Ltd. (SZSE:300559) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of May to CN¥0.15. This makes the dividend yield about the same as the industry average at 1.3%.

View our latest analysis for Chengdu Jiafaantai Education TechnologyLtd

Chengdu Jiafaantai Education TechnologyLtd's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by Chengdu Jiafaantai Education TechnologyLtd's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 139.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

Chengdu Jiafaantai Education TechnologyLtd's Dividend Has Lacked Consistency

Chengdu Jiafaantai Education TechnologyLtd has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of CN¥0.0332 in 2017 to the most recent total annual payment of CN¥0.15. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. Chengdu Jiafaantai Education TechnologyLtd 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.

Dividend Growth May Be Hard To Achieve

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. Unfortunately, Chengdu Jiafaantai Education TechnologyLtd's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company has been growing at a pretty soft 0.3% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Chengdu Jiafaantai Education TechnologyLtd that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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