Precision Tsugami (China) (HKG:1651) Has Announced A Dividend Of CN¥0.40

The board of Precision Tsugami (China) Corporation Limited (HKG:1651) has announced that it will pay a dividend on the 12th of January, with investors receiving CN¥0.40 per share. This means the annual payment is 9.8% of the current stock price, which is above the average for the industry.

See our latest analysis for Precision Tsugami (China)

Precision Tsugami (China)'s Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Precision Tsugami (China)'s earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 38.2%. 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.

Precision Tsugami (China) Is Still Building Its Track Record

It is great to see that Precision Tsugami (China) has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2018, the dividend has gone from CN¥0.138 total annually to CN¥0.731. This means that it has been growing its distributions at 40% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Precision Tsugami (China) Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Precision Tsugami (China) has grown earnings per share at 9.7% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Precision Tsugami (China) Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Precision Tsugami (China) that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.