Precision Tsugami (China) (HKG:1651) Is Due To Pay A Dividend Of CN¥0.40

Precision Tsugami (China) Corporation Limited's (HKG:1651) investors are due to receive a payment of CN¥0.40 per share on 15th of September. This makes the dividend yield 9.5%, which will augment investor returns quite nicely.

See our latest analysis for Precision Tsugami (China)

Precision Tsugami (China)'s Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Precision Tsugami (China)'s earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 28.5% over the next year. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.

Precision Tsugami (China) Is Still Building Its Track Record

Precision Tsugami (China)'s dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of CN¥0.138 in 2018 to the most recent total annual payment of CN¥0.737. This means that it has been growing its distributions at 40% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Precision Tsugami (China) has grown earnings per share at 22% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Precision Tsugami (China) Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Precision Tsugami (China) might even raise payments in the future. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Precision Tsugami (China) that investors need to be conscious of moving forward. 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.