WuXi AppTec (SHSE:603259) Has Announced That It Will Be Increasing Its Dividend To CN¥0.9897

WuXi AppTec Co., Ltd. (SHSE:603259) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of June to CN¥0.9897. This takes the dividend yield to 2.4%, which shareholders will be pleased with.

View our latest analysis for WuXi AppTec

WuXi AppTec's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, WuXi AppTec was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 28.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

WuXi AppTec's Dividend Has Lacked Consistency

WuXi AppTec has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2019, the annual payment back then was CN¥0.247, compared to the most recent full-year payment of CN¥0.983. This means that it has been growing its distributions at 32% 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 Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. WuXi AppTec has impressed us by growing EPS at 28% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

WuXi AppTec Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for WuXi AppTec that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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