Hubei Biocause Heilen Pharmaceutical (SZSE:301211) Will Pay A Larger Dividend Than Last Year At CN¥0.48

Hubei Biocause Heilen Pharmaceutical Co., Ltd.'s (SZSE:301211) dividend will be increasing from last year's payment of the same period to CN¥0.48 on 27th of May. This will take the dividend yield to an attractive 2.7%, providing a nice boost to shareholder returns.

See our latest analysis for Hubei Biocause Heilen Pharmaceutical

Hubei Biocause Heilen Pharmaceutical's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS could expand by 21.8% if recent trends continue. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 65% which brings it into quite a comfortable range.

Hubei Biocause Heilen Pharmaceutical Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The annual payment during the last 2 years was CN¥0.25 in 2022, and the most recent fiscal year payment was CN¥0.48. This means that it has been growing its distributions at 39% per annum over that time. Hubei Biocause Heilen Pharmaceutical has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Hubei Biocause Heilen Pharmaceutical's Dividend Might Lack Growth

The company's investors will be pleased to have been receiving dividend income for some time. Hubei Biocause Heilen Pharmaceutical has seen EPS rising for the last five years, at 22% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Hubei Biocause Heilen Pharmaceutical hasn't been doing.

The Dividend Could Prove To Be Unreliable

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. For example, we've identified 2 warning signs for Hubei Biocause Heilen Pharmaceutical (1 is concerning!) that you should be aware of before investing. 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.