The board of China Electronics Huada Technology Company Limited (HKG:85) has announced that it will be paying its dividend of HK$0.105 on the 31st of July, an increased payment from last year's comparable dividend. This takes the dividend yield to 7.8%, which shareholders will be pleased with.
View our latest analysis for China Electronics Huada Technology
China Electronics Huada Technology's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. 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.
Looking forward, earnings per share could rise by 43.4% 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 24% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from HK$0.03 total annually to HK$0.105. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year 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. We are encouraged to see that China Electronics Huada Technology has grown earnings per share at 43% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
China Electronics Huada Technology Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for China Electronics Huada Technology that investors should take into consideration. 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.