Guanze Medical Information Industry (Holding)'s (HKG:2427) Dividend Will Be CN¥0.021

Guanze Medical Information Industry (Holding) Co., Ltd.'s (HKG:2427) investors are due to receive a payment of CN¥0.021 per share on 20th of June. This means the annual payment will be 2.8% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Guanze Medical Information Industry (Holding)

Guanze Medical Information Industry (Holding)'s Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before this announcement, Guanze Medical Information Industry (Holding) was paying out 86% of earnings, but a comparatively small of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share could rise by 28.1% over the next year if the trend from the last few years continues. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 56% which brings it into quite a comfortable range.

Guanze Medical Information Industry (Holding) Is Still Building Its Track Record

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Could Be Constrained

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Guanze Medical Information Industry (Holding) has seen EPS grow by 28% in 12 months. We always like to see growing earnings, and if the trend continues it would be a very positive sign for the dividend potential. However, Guanze Medical Information Industry (Holding) isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future. Any one year of performance can be misleading for a variety of reasons, so we wouldn't like to form any strong conclusions based on these numbers alone.

Our Thoughts On Guanze Medical Information Industry (Holding)'s Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Guanze Medical Information Industry (Holding) you should be aware of, and 1 of them makes us a bit uncomfortable. 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.