Newland Pharmaceutical (SZSE:301277) Will Pay A Smaller Dividend Than Last Year

Newland Pharmaceutical Co., Ltd. (SZSE:301277) has announced that on 10th of May, it will be paying a dividend ofCN¥0.40, which a reduction from last year's comparable dividend. However, the dividend yield of 2.0% still remains in a typical range for the industry.

See our latest analysis for Newland Pharmaceutical

Newland Pharmaceutical's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Newland Pharmaceutical was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 34.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Newland Pharmaceutical Is Still Building Its Track Record

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Newland Pharmaceutical has grown earnings per share at 34% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We Really Like Newland Pharmaceutical's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Newland Pharmaceutical does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Newland Pharmaceutical that investors need to be conscious of moving forward. Is Newland Pharmaceutical not quite the opportunity you were looking for? Why not check out our selection of top 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.