Yealink Network Technology's (SZSE:300628) Dividend Will Be CN¥0.90

The board of Yealink Network Technology Co., Ltd. (SZSE:300628) has announced that it will pay a dividend of CN¥0.90 per share on the 4th of June. The dividend yield of 4.8% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Yealink Network Technology

Yealink Network Technology's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Yealink Network Technology was paying out a very large proportion of what it was earning and 135% 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.

The next year is set to see EPS grow by 56.9%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 66% which brings it into quite a comfortable range.

Yealink Network Technology Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of CN¥0.107 in 2017 to the most recent total annual payment of CN¥1.80. This implies that the company grew its distributions at a yearly rate of about 50% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Yealink Network Technology Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Yealink Network Technology has impressed us by growing EPS at 18% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Yealink Network Technology's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Yealink Network Technology that investors need to be conscious of moving forward. Is Yealink Network Technology not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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