Shandong Weigao Group Medical Polymer (HKG:1066) Will Pay A Smaller Dividend Than Last Year

Shandong Weigao Group Medical Polymer Company Limited (HKG:1066) is reducing its dividend to HK$0.076 on the 15th of July. Despite the cut, the dividend yield of 2.0% will still be comparable to other companies in the industry.

See our latest analysis for Shandong Weigao Group Medical Polymer

Shandong Weigao Group Medical Polymer's Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Shandong Weigao Group Medical Polymer's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 15.1% over the next year. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

Shandong Weigao Group Medical Polymer Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from CN¥0.058 in 2012 to the most recent annual payment of CN¥0.14. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Shandong Weigao Group Medical Polymer has impressed us by growing EPS at 16% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Shandong Weigao Group Medical Polymer's prospects of growing its dividend payments in the future.

Shandong Weigao Group Medical Polymer Looks Like A Great Dividend Stock

Overall, we think that Shandong Weigao Group Medical Polymer could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Shandong Weigao Group Medical Polymer that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.