Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd (SZSE:301130) Is Increasing Its Dividend To CN¥0.26

Jilin Province Xidian Pharmaceutical Sci-Tech Development Co.,Ltd (SZSE:301130) will increase its dividend from last year's comparable payment on the 12th of June to CN¥0.26. Although the dividend is now higher, the yield is only 1.1%, which is below the industry average.

View our latest analysis for Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd

Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 0.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2022, the annual payment back then was CN¥0.13, compared to the most recent full-year payment of CN¥0.26. This means that it has been growing its distributions at 41% per annum over that time. 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.

Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd hasn't seen much change in its earnings per share over the last five years. While growth may be thin on the ground, Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd will make a great income stock. While Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Jilin Province Xidian Pharmaceutical Sci-Tech DevelopmentLtd has 3 warning signs (and 2 which are significant) we think you should know about. 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.