Guangdong Hybribio BiotechLtd (SZSE:300639) Is Reducing Its Dividend To CN¥0.065

Guangdong Hybribio Biotech Co.,Ltd.'s (SZSE:300639) dividend is being reduced from last year's payment covering the same period to CN¥0.065 on the 23rd of May. Based on this payment, the dividend yield will be 1.1%, which is lower than the average for the industry.

See our latest analysis for Guangdong Hybribio BiotechLtd

Guangdong Hybribio BiotechLtd'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. Before making this announcement, Guangdong Hybribio BiotechLtd was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 68.5%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Guangdong Hybribio BiotechLtd's Dividend Has Lacked Consistency

Guangdong Hybribio BiotechLtd 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. The annual payment during the last 6 years was CN¥0.074 in 2018, and the most recent fiscal year payment was CN¥0.065. This works out to be a decline of approximately 2.1% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

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. Guangdong Hybribio BiotechLtd's earnings per share has shrunk at 14% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Guangdong Hybribio BiotechLtd's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Guangdong Hybribio BiotechLtd is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Guangdong Hybribio BiotechLtd that investors should know about before committing capital to this stock. Is Guangdong Hybribio BiotechLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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