Dawnrays Pharmaceutical (Holdings) (HKG:2348) Will Pay A Dividend Of CN¥0.073

Dawnrays Pharmaceutical (Holdings) Limited's (HKG:2348) investors are due to receive a payment of CN¥0.073 per share on 13th of June. Based on this payment, the dividend yield on the company's stock will be 6.6%, which is an attractive boost to shareholder returns.

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, prior to this announcement, Dawnrays Pharmaceutical (Holdings)'s dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 5.4% if recent trends continue. If the dividend continues on this path, the payout ratio could be 35% 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. Since 2013, the dividend has gone from CN¥0.0332 total annually to CN¥0.077. This implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

We Could See Dawnrays Pharmaceutical (Holdings)'s Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Dawnrays Pharmaceutical (Holdings) has impressed us by growing EPS at 5.4% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Dawnrays Pharmaceutical (Holdings)'s prospects of growing its dividend payments in the future.

Our Thoughts On Dawnrays Pharmaceutical (Holdings)'s Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Dawnrays Pharmaceutical (Holdings) that investors should know about before committing capital to this stock. 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.