Jinhe Biotechnology (SZSE:002688) Is Due To Pay A Dividend Of CN¥0.10

Jinhe Biotechnology CO., LTD.'s (SZSE:002688) investors are due to receive a payment of CN¥0.10 per share on 31st of May. This payment means that the dividend yield will be 2.0%, which is around the industry average.

Check out our latest analysis for Jinhe Biotechnology

Jinhe Biotechnology Is Paying Out More Than It Is Earning

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Jinhe Biotechnology was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Looking forward, EPS could fall by 14.4% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 101%, which could put the dividend in jeopardy if the company's earnings don't improve.

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¥0.05 total annually to CN¥0.10. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Potential Is Shaky

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. Jinhe Biotechnology's earnings per share has shrunk at 14% 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.

Jinhe Biotechnology's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Jinhe Biotechnology is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Jinhe Biotechnology (of which 2 are significant!) 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.