Jinghua Pharmaceutical Group's (SZSE:002349) Upcoming Dividend Will Be Larger Than Last Year's

Jinghua Pharmaceutical Group Co., Ltd. (SZSE:002349) will increase its dividend from last year's comparable payment on the 12th of June to CN¥0.092. Despite this raise, the dividend yield of 1.3% is only a modest boost to shareholder returns.

See our latest analysis for Jinghua Pharmaceutical Group

Jinghua Pharmaceutical Group's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Jinghua Pharmaceutical Group's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 0.2% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 36%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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. Since 2014, the dividend has gone from CN¥0.0167 total annually to CN¥0.092. This means that it has been growing its distributions at 19% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

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. Jinghua Pharmaceutical Group hasn't seen much change in its earnings per share over the last five years.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Jinghua Pharmaceutical Group that you should be aware of before investing. Is Jinghua Pharmaceutical Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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