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

CSPC Pharmaceutical Group Limited's (HKG:1093) dividend will be increasing from last year's payment of the same period to CN¥0.10 on 11th of October. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average.

View our latest analysis for CSPC Pharmaceutical Group

CSPC Pharmaceutical Group's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, CSPC Pharmaceutical Group's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 42.2% over the next year. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

CSPC Pharmaceutical Group's Dividend Has Lacked Consistency

Looking back, CSPC Pharmaceutical Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2013, the annual payment back then was CN¥0.0415, compared to the most recent full-year payment of CN¥0.146. This means that it has been growing its distributions at 15% per annum over that time. CSPC Pharmaceutical Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 21% per annum. 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.

We Really Like CSPC Pharmaceutical Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 26 analysts we track are forecasting for CSPC Pharmaceutical Group for free with public analyst estimates for the company. 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.