China Pioneer Pharma Holdings (HKG:1345) Has Announced That Its Dividend Will Be Reduced To HK$0.064

By
Simply Wall St
Published
April 14, 2022
SEHK:1345
Source: Shutterstock

China Pioneer Pharma Holdings Limited (HKG:1345) has announced it will be reducing its dividend payable on the 10th of June to HK$0.064. The yield is still above the industry average at 5.1%.

View our latest analysis for China Pioneer Pharma Holdings

China Pioneer Pharma Holdings Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, China Pioneer Pharma Holdings' dividend made up quite a large proportion of earnings but only 54% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, EPS could fall by 8.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 106%, which is definitely a bit high to be sustainable going forward.

historic-dividend
SEHK:1345 Historic Dividend April 14th 2022

China Pioneer Pharma Holdings' Dividend Has Lacked Consistency

China Pioneer Pharma Holdings has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The first annual payment during the last 8 years was CN¥0.11 in 2014, and the most recent fiscal year payment was CN¥0.097. Doing the maths, this is a decline of about 1.2% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Is Doubtful

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. China Pioneer Pharma Holdings has seen earnings per share falling at 8.4% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On China Pioneer Pharma Holdings' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think China Pioneer Pharma Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, China Pioneer Pharma Holdings has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is China Pioneer Pharma Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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