Jiashili Group Limited's (HKG:1285) investors are due to receive a payment of CN¥0.10 per share on 25th of June. Based on this payment, the dividend yield on the company's stock will be 9.8%, which is an attractive boost to shareholder returns.
Jiashili Group's Future Dividend Projections Appear Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Jiashili Group's dividend made up quite a large proportion of earnings but only 29% of free cash flows. This leaves plenty of cash for reinvestment into the business.
EPS is set to fall by 13.1% over the next 12 months if recent trends continue. If recent patterns in the dividend continue, we could see the payout ratio reaching 84% in the next 12 months which is on the higher end of the range we would say is sustainable.
See our latest analysis for Jiashili Group
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.0479 in 2015 to the most recent total annual payment of CN¥0.0933. This implies that the company grew its distributions at a yearly rate of about 6.9% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Jiashili Group's EPS has declined at around 13% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Jiashili Group's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. Case in point: We've spotted 4 warning signs for Jiashili Group (of which 1 doesn't sit too well with us!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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