Joinn Laboratories(China)Co.Ltd (SHSE:603127) Is Reducing Its Dividend To CN¥0.16

Joinn Laboratories(China)Co.,Ltd. (SHSE:603127) has announced that on 31st of July, it will be paying a dividend ofCN¥0.16, which a reduction from last year's comparable dividend. However, the dividend yield of 1.1% still remains in a typical range for the industry.

View our latest analysis for Joinn Laboratories(China)Co.Ltd

Joinn Laboratories(China)Co.Ltd Doesn't Earn Enough To Cover Its Payments

We aren't too impressed by dividend yields unless they can be sustained over time. While Joinn Laboratories(China)Co.Ltd is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

EPS is forecast to rise very quickly over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 103%, which is unsustainable.

Joinn Laboratories(China)Co.Ltd's Dividend Has Lacked Consistency

Joinn Laboratories(China)Co.Ltd has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 6 years was CN¥0.0398 in 2018, and the most recent fiscal year payment was CN¥0.16. This means that it has been growing its distributions at 26% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Joinn Laboratories(China)Co.Ltd has seen EPS rising for the last five years, at 24% per annum. Even though the company is not profitable, it is growing at a solid clip. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

Our Thoughts On Joinn Laboratories(China)Co.Ltd's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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.

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 Joinn Laboratories(China)Co.Ltd 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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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.

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