Dawnrays Pharmaceutical (Holdings) (HKG:2348) Has Affirmed Its Dividend Of CN¥0.015

Dawnrays Pharmaceutical (Holdings) Limited (HKG:2348) will pay a dividend of CN¥0.015 on the 3rd of October. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.

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Dawnrays Pharmaceutical (Holdings)'s Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment was quite easily covered by earnings, but it made up 202% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, could fall by 4.9% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 87%, which is definitely on the higher side.

View our latest analysis for Dawnrays Pharmaceutical (Holdings)

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.0439 in 2015 to the most recent total annual payment of CN¥0.0574. This works out to be a compound annual growth rate (CAGR) of approximately 2.7% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

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. Dawnrays Pharmaceutical (Holdings) has seen earnings per share falling at 4.9% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Dawnrays Pharmaceutical (Holdings)'s Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Dawnrays Pharmaceutical (Holdings)'s payments, as there could be some issues with sustaining them into the future. While Dawnrays Pharmaceutical (Holdings) is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Dawnrays Pharmaceutical (Holdings) that you should be aware of before investing. Is Dawnrays Pharmaceutical (Holdings) 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.