China Shineway Pharmaceutical Group (HKG:2877) Is Paying Out A Dividend Of CN¥0.118

China Shineway Pharmaceutical Group Limited (HKG:2877) has announced that it will pay a dividend of CN¥0.118 per share on the 29th of September. This means the annual payment is 5.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for China Shineway Pharmaceutical Group

China Shineway Pharmaceutical Group's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, China Shineway Pharmaceutical Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 33.9%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CN¥0.32 in 2013 to the most recent total annual payment of CN¥0.42. This works out to be a compound annual growth rate (CAGR) of approximately 2.8% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that China Shineway Pharmaceutical Group has been growing its earnings per share at 13% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for China Shineway Pharmaceutical Group's prospects of growing its dividend payments in the future.

China Shineway Pharmaceutical Group Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 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.