Shaanxi Provincial Natural GasLtd (SZSE:002267) Will Pay A Dividend Of CN¥0.30

The board of Shaanxi Provincial Natural Gas Co.,Ltd (SZSE:002267) has announced that it will pay a dividend of CN¥0.30 per share on the 17th of July. Based on this payment, the dividend yield will be 3.6%, which is fairly typical for the industry.

See our latest analysis for Shaanxi Provincial Natural GasLtd

Shaanxi Provincial Natural GasLtd's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last payment was quite easily covered by earnings, but it made up 271% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

If the trend of the last few years continues, EPS will grow by 9.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.15, compared to the most recent full-year payment of CN¥0.30. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Shaanxi Provincial Natural GasLtd might have put its house in order since then, but we remain cautious.

We Could See Shaanxi Provincial Natural GasLtd's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Shaanxi Provincial Natural GasLtd has grown earnings per share at 9.4% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Shaanxi Provincial Natural GasLtd's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Shaanxi Provincial Natural GasLtd that investors need to be conscious of moving forward. Is Shaanxi Provincial Natural GasLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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