Tianneng Power International (HKG:819) Has Announced A Dividend Of CN¥0.40

Tianneng Power International Limited (HKG:819) will pay a dividend of CN¥0.40 on the 7th of July. Based on this payment, the dividend yield on the company's stock will be 4.2%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Tianneng Power International

Tianneng Power International's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Tianneng Power International 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.

Over the next year, EPS is forecast to expand by 64.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.192 in 2013 to the most recent total annual payment of CN¥0.35. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

We Could See Tianneng Power International's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Tianneng Power International has seen EPS rising for the last five years, at 8.8% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tianneng Power International's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Tianneng Power International you should be aware of, and 1 of them can't be ignored. 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.