The board of Jiashili Group Limited (HKG:1285) has announced that it will pay a dividend of CN¥0.10 per share on the 25th of June. The dividend yield will be 10.0% based on this payment which is still above the industry average.
Jiashili Group's Payment Could Potentially Have Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 72% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.
If the company can't turn things around, EPS could fall by 13.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 84%, which is definitely on the higher side.
See our latest analysis for Jiashili Group
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was CN¥0.0479, compared to the most recent full-year payment of CN¥0.0933. This works out to be a compound annual growth rate (CAGR) of approximately 6.9% a year over that time. 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. Jiashili Group's EPS has fallen by approximately 13% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
Our Thoughts On Jiashili Group's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Jiashili Group has 4 warning signs (and 1 which is potentially serious) we think you should know about. Is Jiashili Group 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.