Kingworld Medicines Group (HKG:1110) Is Increasing Its Dividend To CN¥0.0338

Kingworld Medicines Group Limited (HKG:1110) will increase its dividend from last year's comparable payment on the 28th of June to CN¥0.0338. This takes the dividend yield to 5.8%, which shareholders will be pleased with.

Check out our latest analysis for Kingworld Medicines Group

Kingworld Medicines Group's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Kingworld Medicines Group's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, EPS could fall by 0.5% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 52%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CN¥0.0303 in 2014 to the most recent total annual payment of CN¥0.0312. Its dividends have grown at less than 1% per annum over this time frame. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

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. Kingworld Medicines Group hasn't seen much change in its earnings per share over the last five years.

Kingworld Medicines Group's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Kingworld Medicines Group's payments are rock solid. While Kingworld Medicines Group is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. Case in point: We've spotted 3 warning signs for Kingworld Medicines Group (of which 1 is a bit unpleasant!) you should know about. Is Kingworld Medicines 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.