Dawnrays Pharmaceutical (Holdings) (HKG:2348) Is Due To Pay A Dividend Of CN¥0.065

The board of Dawnrays Pharmaceutical (Holdings) Limited (HKG:2348) has announced that it will pay a dividend of CN¥0.065 per share on the 12th of June. The dividend yield will be 6.8% based on this payment which is still above the industry average.

Check out our latest analysis for Dawnrays Pharmaceutical (Holdings)

Dawnrays Pharmaceutical (Holdings)'s Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, based ont he last payment, Dawnrays Pharmaceutical (Holdings) was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Over the next year, EPS could expand by 2.5% if recent trends continue. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.0273 in 2014, and the most recent fiscal year payment was CN¥0.0738. This means that it has been growing its distributions at 10% 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.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.5% a year for the past five years, which isn't massive but still better than seeing them shrink. If Dawnrays Pharmaceutical (Holdings) is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

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 dividend, we are generally unimpressed with its future prospects. We don't think Dawnrays Pharmaceutical (Holdings) is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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.