Beijing SL Pharmaceutical (SZSE:002038) Is Increasing Its Dividend To CN¥0.15

Beijing SL Pharmaceutical Co., Ltd.'s (SZSE:002038) dividend will be increasing from last year's payment of the same period to CN¥0.15 on 4th of July. This takes the dividend yield to 2.0%, which shareholders will be pleased with.

See our latest analysis for Beijing SL Pharmaceutical

Beijing SL Pharmaceutical's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Beijing SL Pharmaceutical's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Unless the company can turn things around, EPS could fall by 13.4% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 62%, which is definitely feasible to continue.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.0889 in 2014 to the most recent total annual payment of CN¥0.15. This means that it has been growing its distributions at 5.4% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Beijing SL Pharmaceutical's earnings per share has shrunk at 13% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Beijing SL Pharmaceutical's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Beijing SL Pharmaceutical'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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Beijing SL Pharmaceutical (of which 1 makes us a bit uncomfortable!) you should know about. 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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