Winner Medical (SZSE:300888) Will Pay A Smaller Dividend Than Last Year

Winner Medical Co., Ltd.'s (SZSE:300888) dividend is being reduced from last year's payment covering the same period to CN¥0.50 on the 4th of June. This means that the dividend yield is 1.7%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for Winner Medical

Winner Medical's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before this announcement, Winner Medical was paying out 77% of earnings, but a comparatively small 74% of free cash flows. This leaves plenty of cash for reinvestment into the business.

According to analysts, EPS should be several times higher next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 19% which is fairly sustainable.

Winner Medical's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of CN¥1.29 in 2021 to the most recent total annual payment of CN¥0.50. Dividend payments have fallen sharply, down 61% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. In the last five years, Winner Medical's earnings per share has shrunk at approximately 4.1% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Winner Medical's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Winner Medical that investors should know about before committing capital to this stock. Is Winner Medical 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.