CSPC Pharmaceutical Group (HKG:1093) Has Announced That It Will Be Increasing Its Dividend To HK$0.10

CSPC Pharmaceutical Group Limited (HKG:1093) has announced that it will be increasing its dividend on the 22nd of June to HK$0.10. This takes the annual payment to 2.3% of the current stock price, which is about average for the industry.

Check out our latest analysis for CSPC Pharmaceutical Group

CSPC Pharmaceutical Group's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, CSPC Pharmaceutical Group's earnings easily cover the dividend. 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 10.8%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

CSPC Pharmaceutical Group's Dividend Has Lacked Consistency

CSPC Pharmaceutical Group has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from CN¥0.041 in 2013 to the most recent annual payment of CN¥0.15. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

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 CSPC Pharmaceutical Group has grown earnings per share at 23% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

CSPC Pharmaceutical Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for CSPC Pharmaceutical Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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