Meter Instruments (SZSE:301006) Is Paying Out Less In Dividends Than Last Year

Meter Instruments Co., Ltd.'s (SZSE:301006) dividend is being reduced from last year's payment covering the same period to CN¥0.3024 on the 9th of July. The yield is still above the industry average at 2.6%.

See our latest analysis for Meter Instruments

Meter Instruments' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Meter Instruments' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, EPS could fall by 4.2% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 47%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Meter Instruments' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of CN¥0.50 in 2021 to the most recent total annual payment of CN¥0.30. Dividend payments have fallen sharply, down 40% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though Meter Instruments' EPS has declined at around 4.2% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Meter Instruments' Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Meter Instruments you should be aware of, and 1 of them is a bit concerning. 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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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.

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