Shandong Weigao Group Medical Polymer's (HKG:1066) Shareholders Will Receive A Bigger Dividend Than Last Year

Shandong Weigao Group Medical Polymer Company Limited (HKG:1066) will increase its dividend on the 12th of July to CN¥0.1035, which is 19% higher than last year's payment from the same period of CN¥0.087. This will take the dividend yield to an attractive 4.0%, providing a nice boost to shareholder returns.

Check out our latest analysis for Shandong Weigao Group Medical Polymer

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't 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.

The next year is set to see EPS grow by 36.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CN¥0.062 in 2014 to the most recent total annual payment of CN¥0.168. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Shandong Weigao Group Medical Polymer Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Shandong Weigao Group Medical Polymer has grown earnings per share at 5.9% 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.

Our Thoughts On Shandong Weigao Group Medical Polymer's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Shandong Weigao Group Medical Polymer that investors should take into consideration. Is Shandong Weigao Group Medical Polymer 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.