Huaren Pharmaceutical (SZSE:300110) Will Pay A Dividend Of CN¥0.021

The board of Huaren Pharmaceutical Co., Ltd. (SZSE:300110) has announced that it will pay a dividend of CN¥0.021 per share on the 10th of July. This payment means the dividend yield will be 0.7%, which is below the average for the industry.

See our latest analysis for Huaren Pharmaceutical

Huaren Pharmaceutical's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Huaren Pharmaceutical's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 36.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 8.3%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.0444, compared to the most recent full-year payment of CN¥0.021. This works out to be a decline of approximately 7.2% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Huaren Pharmaceutical has been growing its earnings per share at 37% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Huaren Pharmaceutical Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Huaren Pharmaceutical might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. See if management have their own wealth at stake, by checking insider shareholdings in Huaren Pharmaceutical stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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