The board of PW Medtech Group Limited (HKG:1358) has announced that it will be increasing its dividend by 7.1% on the 25th of July to CN¥0.053, up from last year's comparable payment of CN¥0.0495. This will take the annual payment to 9.9% of the stock price, which is above what most companies in the industry pay.
Our free stock report includes 1 warning sign investors should be aware of before investing in PW Medtech Group. Read for free now.PW Medtech Group's Future Dividend Projections Appear Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is 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.
Earnings per share could rise by 14.2% over the next year if things go the same way as they have for the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 91%, which is on the higher side, but certainly still feasible.
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. Since 2023, the dividend has gone from CN¥0.0891 total annually to 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
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that PW Medtech Group has grown earnings per share at 14% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.
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. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for PW Medtech Group that you should be aware of before investing. Is PW Medtech Group 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.