Top Resource Energy (SZSE:300332) Is Reducing Its Dividend To CN¥0.056

Top Resource Energy Co., Ltd. (SZSE:300332) has announced that on 1st of July, it will be paying a dividend ofCN¥0.056, which a reduction from last year's comparable dividend. This means that the dividend yield is 1.1%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Top Resource Energy

Top Resource Energy's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Top Resource Energy was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 7.2%, which makes us pretty comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from CN¥0.03 total annually to CN¥0.056. This works out to be a compound annual growth rate (CAGR) of approximately 6.4% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Top Resource Energy's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Top Resource Energy's Dividend

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 company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Top Resource Energy that investors need to be conscious of moving forward. Is Top Resource Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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