Dawnrays Pharmaceutical (Holdings)'s (HKG:2348) Shareholders Will Receive A Bigger Dividend Than Last Year

Dawnrays Pharmaceutical (Holdings) Limited (HKG:2348) will increase its dividend on the 13th of June to CN¥0.073, which is 12% higher than last year's payment from the same period of CN¥0.065. This takes the dividend yield to 6.6%, which shareholders will be pleased with.

Check out our latest analysis for Dawnrays Pharmaceutical (Holdings)

Dawnrays Pharmaceutical (Holdings)'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, Dawnrays Pharmaceutical (Holdings)'s earnings easily cover the dividend. 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. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.0332 in 2013, and the most recent fiscal year payment was CN¥0.077. This implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Dawnrays Pharmaceutical (Holdings) has been growing its earnings per share at 5.4% a 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.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Dawnrays Pharmaceutical (Holdings) that investors should take into consideration. 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.