China Shineway Pharmaceutical Group (HKG:2877) Has Announced That It Will Be Increasing Its Dividend To CN¥0.461

The board of China Shineway Pharmaceutical Group Limited (HKG:2877) has announced that it will be paying its dividend of CN¥0.461 on the 17th of May, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 6.2%, providing a nice boost to shareholder returns.

View our latest analysis for China Shineway Pharmaceutical Group

China Shineway Pharmaceutical Group's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, China Shineway Pharmaceutical Group's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 50.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from CN¥0.32 total annually to CN¥0.535. This means that it has been growing its distributions at 5.3% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that China Shineway Pharmaceutical Group has been growing its earnings per share at 16% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like China Shineway Pharmaceutical Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for China Shineway Pharmaceutical Group that investors should take into consideration. Is China Shineway Pharmaceutical Group 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.