Genertec Universal Medical Group (HKG:2666) Is Reducing Its Dividend To CN¥0.34

Genertec Universal Medical Group Company Limited (HKG:2666) is reducing its dividend from last year's comparable payment to CN¥0.34 on the 27th of June. The dividend yield will be in the average range for the industry at 6.9%.

Check out our latest analysis for Genertec Universal Medical Group

Genertec Universal Medical Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Genertec Universal Medical Group's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 36.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.

Genertec Universal Medical Group Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the dividend has gone from CN¥0.108 total annually to CN¥0.297. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year 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.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Genertec Universal Medical Group has impressed us by growing EPS at 8.3% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Genertec Universal Medical Group's prospects of growing its dividend payments in the future.

Genertec Universal Medical Group Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Genertec Universal Medical Group does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Genertec Universal Medical Group you should be aware of, and 1 of them can't be ignored. Is Genertec Universal Medical Group 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.