CSPC Pharmaceutical Group (HKG:1093) Will Pay A Larger Dividend Than Last Year At HK$0.10

The board of 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 makes the dividend yield about the same as the industry average at 2.4%.

View our latest analysis for CSPC Pharmaceutical Group

CSPC Pharmaceutical Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, CSPC Pharmaceutical Group was easily earning enough to 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 17.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

CSPC Pharmaceutical Group's Dividend Has Lacked Consistency

It's comforting to see that CSPC Pharmaceutical Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2013, the first annual payment was CN¥0.041, compared to the most recent full-year payment of CN¥0.15. This means that it has been growing its distributions at 15% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. CSPC Pharmaceutical Group has seen EPS rising for the last five years, at 22% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

CSPC Pharmaceutical Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that CSPC Pharmaceutical Group is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for CSPC Pharmaceutical Group that investors need to be conscious of moving forward. Is CSPC Pharmaceutical 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.