Wuchan Zhongda GeronLtd's (SZSE:002722) Upcoming Dividend Will Be Larger Than Last Year's

Wuchan Zhongda Geron Co.,Ltd. (SZSE:002722) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of July to CN¥0.19. The payment will take the dividend yield to 1.7%, which is in line with the average for the industry.

View our latest analysis for Wuchan Zhongda GeronLtd

Wuchan Zhongda GeronLtd's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Wuchan Zhongda GeronLtd was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 39.4%. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.08, compared to the most recent full-year payment of CN¥0.19. This means that it has been growing its distributions at 9.0% 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.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Wuchan Zhongda GeronLtd's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While EPS growth is quite low, Wuchan Zhongda GeronLtd has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Wuchan Zhongda GeronLtd's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. For example, we've picked out 1 warning sign for Wuchan Zhongda GeronLtd 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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