Yangtze Optical Fibre And Cable Limited (HKG:6869) Is Increasing Its Dividend To HK$0.33

Yangtze Optical Fibre And Cable Joint Stock Limited Company (HKG:6869) will increase its dividend on the 31st of August to HK$0.33. Based on the announced payment, the dividend yield for the company will be 2.4%, which is fairly typical for the industry.

Check out our latest analysis for Yangtze Optical Fibre And Cable Limited

Yangtze Optical Fibre And Cable Limited's Earnings Easily Cover the Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Yangtze Optical Fibre And Cable Limited was earning enough to cover the dividend, but free cash flows weren't positive. 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 10.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Yangtze Optical Fibre And Cable Limited's Dividend Has Lacked Consistency

Looking back, Yangtze Optical Fibre And Cable Limited'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 2015, the dividend has gone from CN¥0.17 to CN¥0.28. This means that it has been growing its distributions at 7.8% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Yangtze Optical Fibre And Cable Limited May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Yangtze Optical Fibre And Cable Limited's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Yangtze Optical Fibre And Cable Limited's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Yangtze Optical Fibre And Cable Limited will make a great income stock. While Yangtze Optical Fibre And Cable Limited is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Yangtze Optical Fibre And Cable Limited that you should be aware of before investing. Is Yangtze Optical Fibre And Cable Limited 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.