Dnake (Xiamen) Intelligent Technology (SZSE:300884) Is Paying Out A Larger Dividend Than Last Year

The board of Dnake (Xiamen) Intelligent Technology Co., Ltd. (SZSE:300884) has announced that it will be increasing its dividend by 100% on the 29th of May to CN¥0.30, up from last year's comparable payment of CN¥0.15. This takes the dividend yield to 1.6%, which shareholders will be pleased with.

View our latest analysis for Dnake (Xiamen) Intelligent Technology

Dnake (Xiamen) Intelligent Technology Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Dnake (Xiamen) Intelligent Technology's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS could expand by 1.2% if the company continues along the path it has been on recently. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 167% over the next year.

Dnake (Xiamen) Intelligent Technology Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of CN¥0.0952 in 2021 to the most recent total annual payment of CN¥0.15. This means that it has been growing its distributions at 16% per annum over that time. 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.

Dnake (Xiamen) Intelligent Technology May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that Dnake (Xiamen) Intelligent Technology's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Growth of 1.2% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. 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. To that end, Dnake (Xiamen) Intelligent Technology has 3 warning signs (and 1 which is significant) we think you should know about. Is Dnake (Xiamen) Intelligent Technology 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.