Guangdong High Dream Intellectualized Machinery's (SZSE:300720) Dividend Will Be Increased To CN¥0.18

Guangdong High Dream Intellectualized Machinery Co., Ltd. (SZSE:300720) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of May to CN¥0.18. Even though the dividend went up, the yield is still quite low at only 1.0%.

See our latest analysis for Guangdong High Dream Intellectualized Machinery

Guangdong High Dream Intellectualized Machinery Is Paying Out More Than It Is Earning

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. At the time of the last dividend payment, Guangdong High Dream Intellectualized Machinery was paying out a very large proportion of what it was earning and 172% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Looking forward, EPS could fall by 4.7% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 116%, which could put the dividend under pressure if earnings don't start to improve.

Guangdong High Dream Intellectualized Machinery's Dividend Has Lacked Consistency

Guangdong High Dream Intellectualized Machinery 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 2018, the annual payment back then was CN¥0.0741, compared to the most recent full-year payment of CN¥0.18. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Guangdong High Dream Intellectualized Machinery May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Guangdong High Dream Intellectualized Machinery's earnings per share has fallen at approximately 4.7% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Guangdong High Dream Intellectualized Machinery's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Guangdong High Dream Intellectualized Machinery is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Guangdong High Dream Intellectualized Machinery you should be aware of, and 1 of them makes us a bit uncomfortable. Is Guangdong High Dream Intellectualized Machinery 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.