Shenyang Xingqi PharmaceuticalLtd (SZSE:300573) Is Increasing Its Dividend To CN¥3.00

The board of Shenyang Xingqi Pharmaceutical Co.,Ltd. (SZSE:300573) has announced that it will be paying its dividend of CN¥3.00 on the 22nd of May, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 2.1%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Shenyang Xingqi PharmaceuticalLtd's stock price has increased by 90% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Shenyang Xingqi PharmaceuticalLtd

Shenyang Xingqi PharmaceuticalLtd Is Paying Out More Than It Is Earning

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, the company was paying out 196% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share is forecast to rise by 192.5% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 100% over the next year.

Shenyang Xingqi PharmaceuticalLtd's Dividend Has Lacked Consistency

It's comforting to see that Shenyang Xingqi PharmaceuticalLtd has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of CN¥0.0893 in 2017 to the most recent total annual payment of CN¥6.00. This means that it has been growing its distributions at 82% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Shenyang Xingqi PharmaceuticalLtd's Dividend Might Lack Growth

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. It's encouraging to see that Shenyang Xingqi PharmaceuticalLtd has been growing its earnings per share at 70% a year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

Shenyang Xingqi PharmaceuticalLtd's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Shenyang Xingqi PharmaceuticalLtd that investors need to be conscious of moving forward. 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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