Nanjing Well Pharmaceutical GroupLtd's (SHSE:603351) Upcoming Dividend Will Be Larger Than Last Year's

The board of Nanjing Well Pharmaceutical Group Co.,Ltd. (SHSE:603351) has announced that it will be paying its dividend of CN¥0.30 on the 13th of June, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.5%.

See our latest analysis for Nanjing Well Pharmaceutical GroupLtd

Nanjing Well Pharmaceutical GroupLtd's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Nanjing Well Pharmaceutical GroupLtd was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 5.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 35%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Nanjing Well Pharmaceutical GroupLtd Doesn't Have A Long Payment History

It is great to see that Nanjing Well Pharmaceutical GroupLtd 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¥0.306 in 2019 to the most recent total annual payment of CN¥0.30. Payments have been decreasing at a very slow pace in this time period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. It's not great to see that Nanjing Well Pharmaceutical GroupLtd's earnings per share has fallen at approximately 5.6% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Nanjing Well Pharmaceutical GroupLtd's payments are rock solid. 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. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Nanjing Well Pharmaceutical GroupLtd you should be aware of, and 1 of them is significant. Is Nanjing Well Pharmaceutical GroupLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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