China Electronics Huada Technology (HKG:85) Is Paying Out A Larger Dividend Than Last Year

China Electronics Huada Technology Company Limited (HKG:85) will increase its dividend from last year's comparable payment on the 28th of July to HK$0.08. This makes the dividend yield 5.4%, which is above the industry average.

See our latest analysis for China Electronics Huada Technology

China Electronics Huada Technology's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, China Electronics Huada Technology was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 19.3% over the next 12 months. 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. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the annual payment back then was HK$0.03, compared to the most recent full-year payment of HK$0.08. This means that it has been growing its distributions at 12% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. China Electronics Huada Technology has seen EPS rising for the last five years, at 19% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like China Electronics Huada Technology's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for China Electronics Huada Technology (2 are a bit concerning!) that you should be aware of before investing. 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.