China Shineway Pharmaceutical Group's (HKG:2877) Dividend Will Be Reduced To CN¥0.125

China Shineway Pharmaceutical Group Limited's (HKG:2877) dividend is being reduced from last year's payment covering the same period to CN¥0.125 on the 29th of September. This means the annual payment is 7.6% 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 Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, China Shineway Pharmaceutical Group's dividend was comfortably covered by both cash flow and earnings. 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 31.2%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the annual payment back then was CN¥0.37, compared to the most recent full-year payment of CN¥0.39. Dividend payments have been growing, but very slowly over the period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

We Could See China Shineway Pharmaceutical Group's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that China Shineway Pharmaceutical Group has been growing its earnings per share at 5.1% a year over the past five years. China Shineway Pharmaceutical Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On China Shineway Pharmaceutical Group's Dividend

Overall, we think that China Shineway Pharmaceutical Group could make a reasonable income stock, even though it did cut the dividend this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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.