Genertec Universal Medical Group (HKG:2666) Will Pay A Dividend Of CN¥0.35

Genertec Universal Medical Group Company Limited (HKG:2666) will pay a dividend of CN¥0.35 on the 27th of June. This payment means that the dividend yield will be 6.5%, which is around the industry average.

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Genertec Universal Medical Group's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Genertec Universal Medical Group's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 12.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

See our latest analysis for Genertec Universal Medical Group

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

Genertec Universal Medical Group's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 9 years was CN¥0.108 in 2016, and the most recent fiscal year payment was CN¥0.321. This works out to be a compound annual growth rate (CAGR) of approximately 13% 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.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 4.4% per annum over the last five years, which admittedly is a bit slow. If Genertec Universal Medical Group is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Genertec Universal Medical Group is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing 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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