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 Projected Earnings Seem Likely To Cover Future Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 72% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.
Looking forward, could fall by 13.1% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 84%, meaning that most of the company's earnings is being paid out to shareholders.
View 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. Since 2015, the dividend has gone from CN¥0.0479 total annually to CN¥0.0939. This implies that the company grew its distributions at a yearly rate of about 7.0% over that duration. 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.
Dividend Growth Potential Is Shaky
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 13% over the last five years. 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
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.
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. For example, we've identified 4 warning signs for Jiashili Group (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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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