China Shineway Pharmaceutical Group Limited (HKG:2877) will pay a dividend of CN¥0.385 on the 20th of May. However, the dividend yield of 7.4% is still a decent boost to shareholder returns.
China Shineway Pharmaceutical Group's Projected Earnings Seem Likely To Cover Future Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, China Shineway Pharmaceutical Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 26.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.
Check out our latest analysis for China Shineway Pharmaceutical Group
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.23 in 2015, and the most recent fiscal year payment was CN¥0.54. This means that it has been growing its distributions at 8.9% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. China Shineway Pharmaceutical Group has impressed us by growing EPS at 12% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
China Shineway Pharmaceutical Group Looks Like A Great Dividend Stock
It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that China Shineway Pharmaceutical Group has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for China Shineway Pharmaceutical Group that investors need to be conscious of moving forward. Is China Shineway Pharmaceutical Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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