Tong Ren Tang Technologies (HKG:1666) Has Announced A Dividend Of CN¥0.1966

The board of Tong Ren Tang Technologies Co. Ltd. (HKG:1666) has announced that it will pay a dividend of CN¥0.1966 per share on the 11th of August. This means that the annual payment will be 3.9% of the current stock price, which is in line with the average for the industry.

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Tong Ren Tang Technologies' Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Tong Ren Tang Technologies was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 30.1%. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Tong Ren Tang Technologies

Tong Ren Tang Technologies Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of CN¥0.125 in 2015 to the most recent total annual payment of CN¥0.18. This means that it has been growing its distributions at 3.7% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Tong Ren Tang Technologies May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 4.6% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 4.6% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Tong Ren Tang Technologies is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Tong Ren Tang Technologies that you should be aware of before investing. Is Tong Ren Tang Technologies 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.