Stock Analysis

Jacobson Pharma's (HKG:2633) Upcoming Dividend Will Be Larger Than Last Year's

SEHK:2633
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Jacobson Pharma Corporation Limited (HKG:2633) has announced that it will be increasing its dividend from last year's comparable payment on the 18th of October to HK$0.0268. This takes the dividend yield to 5.3%, which shareholders will be pleased with.

See our latest analysis for Jacobson Pharma

Jacobson Pharma's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Jacobson Pharma's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 4.0% over the next 12 months if recent trends continue. 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.

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SEHK:2633 Historic Dividend July 14th 2022

Jacobson Pharma's Dividend Has Lacked Consistency

It's comforting to see that Jacobson Pharma has been paying a dividend for a number of years now, however it has been cut at least once in that time. 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. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Jacobson Pharma May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. 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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Jacobson Pharma (of which 1 shouldn't be ignored!) you should know about. Is Jacobson Pharma 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.