Zoomlion Heavy Industry Science and Technology (SZSE:000157) Has Announced A Dividend Of CN¥0.32

The board of Zoomlion Heavy Industry Science and Technology Co., Ltd. (SZSE:000157) has announced that it will pay a dividend on the 26th of July, with investors receiving CN¥0.32 per share. The dividend yield will be 4.4% based on this payment which is still above the industry average.

Check out our latest analysis for Zoomlion Heavy Industry Science and Technology

Zoomlion Heavy Industry Science and Technology’s Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn’t matter much if the payments can’t be sustained. Prior to this announcement, Zoomlion Heavy Industry Science and Technology’s dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 919% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

The next year is set to see EPS grow by 71.3%. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from CN¥0.15 total annually to CN¥0.32. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. 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 May Be Hard To Achieve

With a relatively unstable dividend, it’s even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Zoomlion Heavy Industry Science and Technology has only grown its earnings per share at 4.2% per annum over the past five years. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. That’s fine as far as it goes, but we’re less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On Zoomlion Heavy Industry Science and Technology’s Dividend

Overall, we don’t think this company makes a great dividend stock, even though the dividend wasn’t cut this year. While Zoomlion Heavy Industry Science and Technology is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we’ve picked out 3 warning signs for Zoomlion Heavy Industry Science and Technology that investors should know about before committing capital to this stock. 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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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.

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