Consun Pharmaceutical Group (HKG:1681) Will Pay A Dividend Of HK$0.20

Consun Pharmaceutical Group Limited's (HKG:1681) investors are due to receive a payment of HK$0.20 per share on 17th of June. The dividend yield will be 6.7% based on this payment which is still above the industry average.

View our latest analysis for Consun Pharmaceutical Group

Consun Pharmaceutical Group's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Consun Pharmaceutical Group's dividend was comfortably covered by both cash flow and earnings. 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 7.3%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Consun Pharmaceutical Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 8 years was CN¥0.076 in 2014, and the most recent fiscal year payment was CN¥0.24. This works out to be a compound annual growth rate (CAGR) of approximately 16% 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. We are encouraged to see that Consun Pharmaceutical Group has grown earnings per share at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Consun Pharmaceutical Group's prospects of growing its dividend payments in the future.

Consun Pharmaceutical Group Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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 in all, this checks a lot of the boxes we look for when choosing an income 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 example, we've picked out 2 warning signs for Consun Pharmaceutical Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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