Stock Analysis

Hefei Lifeon Pharmaceutical (SZSE:003020) Has Announced A Dividend Of CN¥0.50

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Hefei Lifeon Pharmaceutical Co., Ltd. (SZSE:003020) has announced that it will pay a dividend of CN¥0.50 per share on the 28th of May. This means the dividend yield will be fairly typical at 2.0%.

Check out our latest analysis for Hefei Lifeon Pharmaceutical

Hefei Lifeon Pharmaceutical's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Hefei Lifeon Pharmaceutical was paying only paying out a fraction of earnings, but the payment was a massive 643% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 29.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

SZSE:003020 Historic Dividend May 23rd 2024

Hefei Lifeon Pharmaceutical Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of CN¥0.296 in 2021 to the most recent total annual payment of CN¥0.50. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

We Could See Hefei Lifeon Pharmaceutical's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Hefei Lifeon Pharmaceutical has seen EPS rising for the last five years, at 8.1% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Hefei Lifeon Pharmaceutical's prospects of growing its dividend payments in the future.

Our Thoughts On Hefei Lifeon Pharmaceutical's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Hefei Lifeon Pharmaceutical that investors should know about before committing capital to this stock. Is Hefei Lifeon Pharmaceutical not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.