Yixintang Pharmaceutical Group (SZSE:002727) Is Due To Pay A Dividend Of CN¥0.40

The board of Yixintang Pharmaceutical Group Co., Ltd. (SZSE:002727) has announced that it will pay a dividend on the 30th of May, with investors receiving CN¥0.40 per share. Based on this payment, the dividend yield will be 1.8%, which is fairly typical for the industry.

See our latest analysis for Yixintang Pharmaceutical Group

Yixintang Pharmaceutical Group's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Yixintang Pharmaceutical Group was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 147.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

Yixintang Pharmaceutical Group Is Still Building Its Track Record

It is great to see that Yixintang Pharmaceutical Group has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of CN¥0.30 in 2015 to the most recent total annual payment of CN¥0.40. This means that it has been growing its distributions at 3.2% per annum over that time. Yixintang Pharmaceutical Group hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Yixintang Pharmaceutical Group's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Yixintang Pharmaceutical Group's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Yixintang Pharmaceutical Group that you should be aware of before investing. 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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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.