Shenzhen AV-Display (SZSE:300939) Has Announced A Dividend Of CN¥0.40

Shenzhen AV-Display Co., Ltd.'s (SZSE:300939) investors are due to receive a payment of CN¥0.40 per share on 22nd of May. This means the dividend yield will be fairly typical at 1.4%.

See our latest analysis for Shenzhen AV-Display

Shenzhen AV-Display's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Shenzhen AV-Display's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 3.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

Shenzhen AV-Display Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of CN¥0.333 in 2021 to the most recent total annual payment of CN¥0.40. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Shenzhen AV-Display to be a consistent dividend paying stock.

Shenzhen AV-Display May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 3.8% per annum over the last five years, which admittedly is a bit slow. Growth of 3.8% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Shenzhen AV-Display's Dividend

Overall, we think Shenzhen AV-Display is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Taking the debate a bit further, we've identified 1 warning sign for Shenzhen AV-Display that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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