Precision Tsugami (China) (HKG:1651) Is Paying Out 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 15th of September, with investors receiving CN¥0.40 per share. The dividend yield will be 9.3% based on this payment which is still above the industry average.

View our latest analysis for Precision Tsugami (China)

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

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Precision Tsugami (China) was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 37.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Since 2018, the annual payment back then was CN¥0.138, compared to the most recent full-year payment of CN¥0.731. This works out to be a compound annual growth rate (CAGR) of approximately 40% a year 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. Precision Tsugami (China) has seen EPS rising for the last five years, at 22% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Precision Tsugami (China) could prove to be a strong dividend payer.

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 of these factors considered, we think this has solid potential as a dividend 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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