Dongguang Chemical (HKG:1702) Will Pay A Dividend Of CN¥0.08

Dongguang Chemical Limited (HKG:1702) has announced that it will pay a dividend of CN¥0.08 per share on the 7th of June. This means the annual payment will be 4.0% of the current stock price, which is lower than the industry average.

View our latest analysis for Dongguang Chemical

Dongguang Chemical's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Dongguang Chemical's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 13.8% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.

Dongguang Chemical Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 6 years was CN¥0.0163 in 2018, and the most recent fiscal year payment was CN¥0.0736. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Dongguang Chemical has impressed us by growing EPS at 14% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Dongguang Chemical's prospects of growing its dividend payments in the future.

We Really Like Dongguang Chemical's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Dongguang Chemical that investors need to be conscious of moving forward. Is Dongguang Chemical not quite the opportunity you were looking for? Why not check out our selection of top 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.