Shenzhen Vital New Material's (SZSE:301319) Dividend Will Be Increased To CN¥1.40

Shenzhen Vital New Material Co., Ltd. (SZSE:301319) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of May to CN¥1.40. This takes the dividend yield to 3.0%, which shareholders will be pleased with.

Check out our latest analysis for Shenzhen Vital New Material

Shenzhen Vital New Material's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Shenzhen Vital New Material was paying out a very large proportion of what it was earning and 165% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 96.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 52%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Shenzhen Vital New Material Is Still Building Its Track Record

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.

Shenzhen Vital New Material Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Shenzhen Vital New Material has impressed us by growing EPS at 12% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Shenzhen Vital New Material's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Shenzhen Vital New Material will make a great income stock. Strong earnings growth means Shenzhen Vital New Material has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Shenzhen Vital New Material 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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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.