China Pioneer Pharma Holdings' (HKG:1345) Shareholders Will Receive A Smaller Dividend Than Last Year

China Pioneer Pharma Holdings Limited (HKG:1345) is reducing its dividend from last year's comparable payment to CN¥0.018 on the 20th of October. However, the dividend yield of 5.2% is still a decent boost to shareholder returns.

View our latest analysis for China Pioneer Pharma Holdings

China Pioneer Pharma Holdings' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, China Pioneer Pharma Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 5.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 50%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

China Pioneer Pharma Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of CN¥0.107 in 2014 to the most recent total annual payment of CN¥0.0974. This works out to be a decline of approximately 1.2% per year over that time. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though China Pioneer Pharma Holdings' EPS has declined at around 5.4% a year. 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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think China Pioneer Pharma Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for China Pioneer Pharma Holdings (of which 1 is concerning!) you should know about. 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.