China Electronics Huada Technology (HKG:85) Has Announced That It Will Be Increasing Its Dividend To HK$0.08

China Electronics Huada Technology Company Limited's (HKG:85) dividend will be increasing from last year's payment of the same period to HK$0.08 on 28th of July. This makes the dividend yield 7.2%, which is above the industry average.

View our latest analysis for China Electronics Huada Technology

China Electronics Huada Technology's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, China Electronics Huada Technology's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 19.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

China Electronics Huada Technology's Dividend Has Lacked Consistency

Looking back, China Electronics Huada Technology's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was HK$0.03 in 2014, and the most recent fiscal year payment was HK$0.08. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that China Electronics Huada Technology has grown earnings per share at 19% per year over the past five years. China Electronics Huada Technology definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like China Electronics Huada Technology's Dividend

Overall, a dividend increase is always good, and we think that China Electronics Huada Technology is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for China Electronics Huada Technology you should be aware of, and 1 of them is significant. Is China Electronics Huada Technology 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.