Getein Biotech (SHSE:603387) Is Due To Pay A Dividend Of CN¥0.10

Getein Biotech, Inc (SHSE:603387) will pay a dividend of CN¥0.10 on the 12th of June. However, the dividend yield of 2.3% is still a decent boost to shareholder returns.

View our latest analysis for Getein Biotech

Getein Biotech's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Getein Biotech's was paying out quite a large proportion of earnings and 81% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Looking forward, earnings per share could rise by 0.3% over the next year if the trend from the last few years continues. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 50% which would be quite comfortable going to take the dividend forward.

Getein Biotech's Dividend Has Lacked Consistency

It's comforting to see that Getein Biotech has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of CN¥0.117 in 2018 to the most recent total annual payment of CN¥0.20. This implies that the company grew its distributions at a yearly rate of about 9.3% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Getein Biotech might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Getein Biotech hasn't seen much change in its earnings per share over the last five years. Getein Biotech's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. For instance, we've picked out 1 warning sign for Getein Biotech that investors should take into consideration. Is Getein Biotech not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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