Dawnrays Pharmaceutical (Holdings)'s (HKG:2348) Dividend Will Be 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. However, the dividend yield of 6.7% is still a decent boost to shareholder returns.

View our latest analysis for Dawnrays Pharmaceutical (Holdings)

Dawnrays Pharmaceutical (Holdings)'s Dividend Is Well Covered By Earnings

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. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, earnings per share could rise by 2.5% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

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¥0.0351 in 2014 to the most recent total annual payment of CN¥0.0738. This means that it has been growing its distributions at 7.7% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

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. However, Dawnrays Pharmaceutical (Holdings) has only grown its earnings per share at 2.5% per annum over the past five years. While growth may be thin on the ground, Dawnrays Pharmaceutical (Holdings) could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Dawnrays Pharmaceutical (Holdings) has been making. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Dawnrays Pharmaceutical (Holdings) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection 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.