Chengdu Tangyuan ElectricLtd's (SZSE:300789) Dividend Is Being Reduced To CN¥0.292

Chengdu Tangyuan Electric Co.,Ltd. (SZSE:300789) is reducing its dividend from last year's comparable payment to CN¥0.292 on the 6th of June. The dividend yield will be in the average range for the industry at 1.6%.

View our latest analysis for Chengdu Tangyuan ElectricLtd

Chengdu Tangyuan ElectricLtd's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, Chengdu Tangyuan ElectricLtd's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 1.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 36%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Chengdu Tangyuan ElectricLtd's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The dividend has gone from an annual total of CN¥0.155 in 2020 to the most recent total annual payment of CN¥0.292. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Chengdu Tangyuan ElectricLtd 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.

Chengdu Tangyuan ElectricLtd 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. Unfortunately, Chengdu Tangyuan ElectricLtd's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Chengdu Tangyuan ElectricLtd's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Chengdu Tangyuan ElectricLtd that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.