CSPC Pharmaceutical Group (HKG:1093) Will Pay A Dividend Of CN¥0.14

CSPC Pharmaceutical Group Limited's (HKG:1093) investors are due to receive a payment of CN¥0.14 per share on 26th of June. Based on this payment, the dividend yield for the company will be 4.2%, which is fairly typical for the industry.

View 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. The last payment was quite easily covered by earnings, but it made up 134% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to expand by 31.8%. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.0329 in 2014 to the most recent total annual payment of CN¥0.258. This means that it has been growing its distributions at 23% per annum over that time. 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.

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 14% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for CSPC Pharmaceutical Group that investors should take into consideration. 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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