Ausnutria Dairy Corporation Ltd's (HKG:1717) dividend will be increasing from last year's payment of the same period to CN¥0.06 on 25th of June. This takes the annual payment to 3.1% of the current stock price, which unfortunately is below what the industry is paying.
We've discovered 1 warning sign about Ausnutria Dairy. View them for free.Ausnutria Dairy's Future Dividend Projections Appear Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Ausnutria Dairy's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Looking forward, earnings per share is forecast to rise by 16.6% over the next year. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.
View our latest analysis for Ausnutria Dairy
Ausnutria Dairy's Dividend Has Lacked Consistency
Ausnutria Dairy has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2016, the annual payment back then was CN¥0.025, compared to the most recent full-year payment of CN¥0.0562. This implies that the company grew its distributions at a yearly rate of about 9.4% 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
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Ausnutria Dairy's earnings per share has shrunk at 25% a year over 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. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
Ausnutria Dairy's Dividend Doesn't Look Sustainable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Ausnutria Dairy is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
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 Ausnutria Dairy that investors should take into consideration. 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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