Perfect Medical Health Management's (HKG:1830) Upcoming Dividend Will Be Larger Than Last Year's

Perfect Medical Health Management Limited (HKG:1830) will increase its dividend from last year's comparable payment on the 8th of September to HK$0.17. This makes the dividend yield about the same as the industry average at 5.8%.

See our latest analysis for Perfect Medical Health Management

Perfect Medical Health Management Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Perfect Medical Health Management's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Earnings per share could rise by 6.9% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 127%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was HK$0.066, compared to the most recent full-year payment of HK$0.253. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Perfect Medical Health Management has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Perfect Medical Health Management May Have Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Perfect Medical Health Management has grown earnings per share at 6.9% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Our Thoughts On Perfect Medical Health Management's Dividend

Overall, we always like to see the dividend being raised, but we don't think Perfect Medical Health Management will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Perfect Medical Health Management that investors should take into consideration. Is Perfect Medical Health Management 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.