Shenzhen Microgate Technology (SZSE:300319) Will Pay a Smaller Dividend Than Last Year
Shenzhen Microgate Technology Co., Ltd. (SZSE:300319) is set to reduce its dividend from last year's comparable payment, issuing CN¥0.0937 per share on the 18th of June. This reduction will bring the dividend yield to 1.2%, significantly lower than the industry average.
Sustainability of Shenzhen Microgate Technology’s Dividends
The dividend yield may be low, but the sustainability of these payments is critical when evaluating an income stock. Before this announcement, Shenzhen Microgate Technology easily earned enough to cover its dividend, reinvesting a large proportion of earnings back into the business. Looking ahead, earnings per share (EPS) are forecasted to rise by 31.2% over the next year. If this growth continues, the payout ratio could reach 26% by next year, a likely sustainable level.
Dividend Volatility and Growth Prospects
While Shenzhen Microgate Technology has a history of paying dividends, it has cut its dividend at least once in the last decade. Since 2014, the dividend has increased from CN¥0.0135 annually to CN¥0.094, growing at an impressive 21% per annum. Despite this rapid growth, past cuts introduce an element of uncertainty regarding its reliability as a future income source.
Future Growth of Dividends
To determine if dividend growth will continue, it’s essential to examine earnings growth. Notably, Shenzhen Microgate Technology has been growing its earnings per share (EPS) at a steady 15% per year over the past five years. Given this solid growth and a low payout ratio, the prospects for future dividend increases appear promising.
Is Shenzhen Microgate Technology a Good Dividend Stock?
While reducing the dividend is rarely positive news, this move could protect the company's balance sheet and ensure long-term sustainability. Investors seeking stable dividend policies may find potential in Shenzhen Microgate Technology. However, consistency in dividend payments is pivotal, and one should be cautious before considering this stock for income-focused portfolios.
Investors should also be aware of a potential warning sign for Shenzhen Microgate Technology before committing capital.
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