Zhejiang Wolwo Bio-Pharmaceutical (SZSE:300357) Has Announced That Its Dividend Will Be Reduced To CN¥0.185

Zhejiang Wolwo Bio-Pharmaceutical Co., Ltd. (SZSE:300357) is reducing its dividend from last year's comparable payment to CN¥0.185 on the 4th of July. This means that the annual payment is 0.9% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Zhejiang Wolwo Bio-Pharmaceutical

Zhejiang Wolwo Bio-Pharmaceutical's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Zhejiang Wolwo Bio-Pharmaceutical'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.

Over the next year, EPS is forecast to expand by 80.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Zhejiang Wolwo Bio-Pharmaceutical's Dividend Has Lacked Consistency

Zhejiang Wolwo Bio-Pharmaceutical has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2015, the annual payment back then was CN¥0.0926, compared to the most recent full-year payment of CN¥0.185. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Zhejiang Wolwo Bio-Pharmaceutical might have put its house in order since then, but we remain cautious.

Zhejiang Wolwo Bio-Pharmaceutical Could Grow Its Dividend

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. It's encouraging to see that Zhejiang Wolwo Bio-Pharmaceutical has been growing its earnings per share at 5.1% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Zhejiang Wolwo Bio-Pharmaceutical that investors should know about before committing capital to this 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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