China Resources Pharmaceutical Group Limited (HKG:3320) will increase its dividend from last year's comparable payment on the 19th of July to CN¥0.1697. This takes the annual payment to 2.9% of the current stock price, which is about average for the industry.
View our latest analysis for China Resources Pharmaceutical Group
China Resources Pharmaceutical Group's Earnings Easily Cover The Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, China Resources Pharmaceutical Group's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 34.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.
China Resources Pharmaceutical Group Is Still Building Its Track Record
It is great to see that China Resources Pharmaceutical Group has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was CN¥0.0796, compared to the most recent full-year payment of CN¥0.154. This implies that the company grew its distributions at a yearly rate of about 9.9% over that duration. China Resources Pharmaceutical Group has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, China Resources Pharmaceutical Group's EPS was effectively flat over the past five years, which could stop the company from paying more every year. If China Resources Pharmaceutical Group is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 10 analysts we track are forecasting for China Resources Pharmaceutical Group for free with public analyst estimates for the company. Is China Resources Pharmaceutical Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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