The board of WINBO-Dongjian Automotive Technology Co., Ltd. (SZSE:300978) has announced that it will be paying its dividend of CN¥0.20 on the 3rd of June, an increased payment from last year’s comparable dividend. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.

Check out our latest analysis for WINBO-Dongjian Automotive Technology

WINBO-Dongjian Automotive Technology’s Earnings Easily Cover The Distributions

We aren’t too impressed by dividend yields unless they can be sustained over time. WINBO-Dongjian Automotive Technology was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

EPS is set to fall by 1.3% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 32%, which we consider to be quite comfortable, with most of the company’s earnings left over to grow the business in the future.

WINBO-Dongjian Automotive Technology’s Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2021, the dividend has gone from CN¥0.50 total annually to CN¥0.20. The dividend has fallen 60% over that period. A company that decreases its dividend over time generally isn’t what we are looking for.

Dividend Growth May Be Hard To Achieve

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Although it’s important to note that WINBO-Dongjian Automotive Technology’s earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On WINBO-Dongjian Automotive Technology’s Dividend

In summary, while it’s always good to see the dividend being raised, we don’t think WINBO-Dongjian Automotive Technology’s payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments WINBO-Dongjian Automotive Technology has been making. Overall, we don’t think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for WINBO-Dongjian Automotive Technology (1 can’t be ignored!) that you should be aware of before investing. Is WINBO-Dongjian Automotive Technology 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.