Zenner Metering Technology (Shanghai)'s (SZSE:301303) Upcoming Dividend Will Be Larger Than Last Year's

Zenner Metering Technology (Shanghai) Ltd.'s (SZSE:301303) dividend will be increasing from last year's payment of the same period to CN¥0.35 on 7th of June. The payment will take the dividend yield to 1.9%, which is in line with the average for the industry.

View our latest analysis for Zenner Metering Technology (Shanghai)

Zenner Metering Technology (Shanghai)'s Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Zenner Metering Technology (Shanghai) was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, EPS could fall by 10.7% 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 35%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Zenner Metering Technology (Shanghai) Doesn't Have A Long Payment History

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 11% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Zenner Metering Technology (Shanghai) will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

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 instance, we've picked out 2 warning signs for Zenner Metering Technology (Shanghai) that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.