Genertec Universal Medical Group Company Limited (HKG:2666) will pay a dividend of CN¥0.35 on the 27th of June. This means the dividend yield will be fairly typical at 6.8%.
We've discovered 2 warning signs about Genertec Universal Medical Group. View them for free.Genertec Universal Medical Group's Payment Could Potentially Have Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Genertec Universal Medical Group's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Over the next year, EPS is forecast to expand by 12.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.
View our latest analysis for Genertec Universal Medical Group
Genertec Universal Medical Group Is Still Building Its Track Record
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of CN¥0.108 in 2016 to the most recent total annual payment of CN¥0.326. This means that it has been growing its distributions at 13% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
Genertec Universal Medical Group May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. However, Genertec Universal Medical Group has only grown its earnings per share at 4.4% per annum over the past five years. While growth may be thin on the ground, Genertec Universal Medical Group could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Genertec Universal Medical Group's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Genertec Universal Medical Group is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Genertec Universal Medical Group you should be aware of, and 1 of them is a bit concerning. 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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