Stock Analysis

Jacobson Pharma's (HKG:2633) Shareholders Will Receive A Bigger Dividend Than Last Year

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The board of Jacobson Pharma Corporation Limited (HKG:2633) has announced that it will be paying its dividend of HK$0.0268 on the 18th of October, an increased payment from last year's comparable dividend. This will take the annual payment to 5.2% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Jacobson Pharma

Jacobson Pharma's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Jacobson Pharma's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, EPS could fall by 4.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 48%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

SEHK:2633 Historic Dividend July 28th 2022

Jacobson Pharma's Dividend Has Lacked Consistency

Jacobson Pharma has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of HK$0.016 in 2016 to the most recent total annual payment of HK$0.0388. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Jacobson Pharma has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Jacobson Pharma's EPS has declined at around 4.0% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Jacobson Pharma's Dividend

Overall, we always like to see the dividend being raised, but we don't think Jacobson Pharma will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 2 warning signs for Jacobson Pharma (1 is significant!) that you should be aware of before investing. 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.