Zhuhai Kles TechnologyLtd (SZSE:301314) Has Announced That Its Dividend Will Be Reduced To CN¥0.36

Zhuhai Kles Technology Co.,Ltd (SZSE:301314) has announced that on 29th of May, it will be paying a dividend ofCN¥0.36, which a reduction from last year's comparable dividend. This means that the annual payment is 1.1% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Zhuhai Kles TechnologyLtd

Zhuhai Kles TechnologyLtd Doesn't Earn Enough To Cover Its Payments

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Zhuhai Kles TechnologyLtd was paying out quite a large proportion of both earnings and cash flow, with the dividend being 510% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

If the company can't turn things around, EPS could fall by 33.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 117%, which could put the dividend under pressure if earnings don't start to improve.

Zhuhai Kles TechnologyLtd Is Still Building Its Track Record

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend 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.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Zhuhai Kles TechnologyLtd's EPS has fallen by approximately 34% per year during the past three years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Zhuhai Kles TechnologyLtd's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Zhuhai Kles TechnologyLtd (1 is a bit concerning!) that you should be aware of before investing. 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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