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Consun Pharmaceutical Group (HKG:1681) Has Announced That It Will Be Increasing Its Dividend To HK$0.10
The board of Consun Pharmaceutical Group Limited (HKG:1681) has announced that it will be increasing its dividend on the 15th of September to HK$0.10. This will take the annual payment from 7.1% to 7.8% of the stock price, which is above what most companies in the industry pay.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Consun Pharmaceutical Group's stock price has reduced by 32% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
Check out our latest analysis for Consun Pharmaceutical Group
Consun Pharmaceutical Group's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Consun Pharmaceutical Group's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 6.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which is in the range that makes us comfortable with the sustainability of the dividend.
Consun Pharmaceutical Group's Dividend Has Lacked Consistency
Looking back, Consun Pharmaceutical Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2014, the first annual payment was CN¥0.076, compared to the most recent full-year payment of CN¥0.23. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Consun 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
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. Consun Pharmaceutical Group has impressed us by growing EPS at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Consun 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Consun Pharmaceutical Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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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.
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About SEHK:1681
Consun Pharmaceutical Group
Produces and sells pharmaceutical products in Mainland China.
Very undervalued with flawless balance sheet.
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