PW Medtech Group Limited (HKG:1358) has announced that it will be increasing its periodic dividend on the 25th of July to CN¥0.053, which will be 7.1% higher than last year's comparable payment amount of CN¥0.0495. This makes the dividend yield 9.2%, which is above the industry average.
PW Medtech Group's Future Dividend Projections Appear Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 94% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Over the next year, EPS could expand by 14.2% if the company continues along the path it has been on recently. If recent patterns in the dividend continue, the payout ratio in 12 months could be 91% which is a bit high but can definitely be sustainable.
View our latest analysis for PW Medtech Group
PW Medtech Group Is Still Building Its Track Record
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of CN¥0.0891 in 2023 to the most recent total annual payment of CN¥0.0914. This works out to be a compound annual growth rate (CAGR) of approximately 1.3% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
PW Medtech Group's Dividend Might Lack Growth
The company's investors will be pleased to have been receiving dividend income for some time. PW Medtech Group has seen EPS rising for the last five years, at 14% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think PW Medtech Group's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
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. For example, we've picked out 1 warning sign for PW Medtech Group 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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