R&G PharmaStudies' (SZSE:301333) Dividend Will Be Reduced To CN¥0.20

R&G PharmaStudies Co., Ltd.'s (SZSE:301333) dividend is being reduced from last year's payment covering the same period to CN¥0.20 on the 5th of July. Based on this payment, the dividend yield will be 0.6%, which is lower than the average for the industry.

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. R&G PharmaStudies' stock price has reduced by 36% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for R&G PharmaStudies

R&G PharmaStudies' 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. However, prior to this announcement, R&G PharmaStudies' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 35.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 9.0%, which is in the range that makes us comfortable with the sustainability of the dividend.

R&G PharmaStudies Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. 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.

R&G PharmaStudies Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. R&G PharmaStudies has impressed us by growing EPS at 7.3% per year over the past five years. R&G PharmaStudies definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On R&G PharmaStudies' Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 R&G PharmaStudies analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is R&G PharmaStudies 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.

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