China Shineway Pharmaceutical Group Limited (HKG:2877) dividend is reduced from last year’s payout covering the same period to CN¥0.125 on September 29. This means that the annual payout is 7.6% of the current share price, which is above the industry average.
Check out our latest analysis for China Shineway Pharmaceutical Group
Chinese pharmaceutical group Shineway’s revenues easily cover distributions
A big dividend yield for a few years doesn’t mean much if it can’t be sustained. However, prior to this announcement, China Shineway Pharmaceutical Group’s dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is used to help it grow.
Next year is expected to see EPS grow by 31.2%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we believe can be quite sustainable in the future.
Dividend volatility
The company’s dividend history has been marked by instability, with at least one decline over the past 10 years. As of 2012, the annual payment at the time was CN¥0.37, compared to the most recent annual payment of CN¥0.39. Dividend payouts increased, but very slowly over the period. Modest dividend growth is good to see, but we believe this is offset by historic payout reductions. It is difficult to live on dividend income if the company’s profits are not constant.
We could see China Shineway Pharmaceutical Group’s dividend increase
Since the dividend has been reduced in the past, we need to check if earnings are increasing and if this could lead to higher dividends in the future. It is encouraging to see that China Shineway Pharmaceutical Group has increased its earnings per share by 5.1% per year over the past five years. China Shineway Pharmaceutical Group definitely has the potential to increase its dividend in the future with earnings on an uptrend and a low payout ratio.
Our thoughts on the China Shineway Pharmaceutical Group dividend
Overall, we think China Shineway Pharmaceutical Group could make a reasonable stock of income, even though it cut the dividend this year. While the payout ratios are a good sign, we are less enthusiastic about the company’s dividend record. The payout isn’t outstanding, but it could be a decent addition to a dividend portfolio.
Investors generally tend to favor companies with a consistent and stable dividend policy as opposed to those with an irregular one. Meanwhile, despite the importance of dividend payouts, these are not the only factors our readers should be aware of when evaluating a company. For example, we chose 1 warning sign for China Shineway Pharmaceutical Group that investors should consider. Isn’t China Shineway Pharmaceutical Group quite the opportunity you’ve been looking for? Why not check out our selection of the best dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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