Guangdong Green Precision Components (SZSE:300968) Will Pay A Smaller Dividend Than Last Year

Guangdong Green Precision Components Co., Ltd (SZSE:300968) is reducing its dividend from last year's comparable payment to CN¥0.05 on the 7th of June. This means that the dividend yield is 0.5%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Guangdong Green Precision Components

Guangdong Green Precision Components' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by Guangdong Green Precision Components' earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, could fall by 19.5% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 80%, which is definitely on the higher side.

Guangdong Green Precision Components' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2022, the annual payment back then was CN¥0.20, compared to the most recent full-year payment of CN¥0.05. Dividend payments have fallen sharply, down 75% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Guangdong Green Precision Components' EPS has fallen by approximately 19% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Guangdong Green Precision Components' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Guangdong Green Precision Components is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 3 warning signs for Guangdong Green Precision Components (1 is a bit unpleasant!) 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.