Stock Analysis

China Resources Pharmaceutical Group Limited (HKG:3320) Looks Interesting, And It's About To Pay A Dividend

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SEHK:3320
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It looks like China Resources Pharmaceutical Group Limited (HKG:3320) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase China Resources Pharmaceutical Group's shares on or after the 5th of June will not receive the dividend, which will be paid on the 21st of July.

The company's next dividend payment will be HK$0.16 per share. Last year, in total, the company distributed HK$0.16 to shareholders. Based on the last year's worth of payments, China Resources Pharmaceutical Group has a trailing yield of 2.1% on the current stock price of HK$7.51. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether China Resources Pharmaceutical Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for China Resources Pharmaceutical Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. China Resources Pharmaceutical Group has a low and conservative payout ratio of just 24% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 10% of its free cash flow last year.

It's positive to see that China Resources Pharmaceutical Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
SEHK:3320 Historic Dividend May 31st 2023

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at China Resources Pharmaceutical Group, with earnings per share up 3.6% on average over the last five years. China Resources Pharmaceutical Group is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. China Resources Pharmaceutical Group has delivered an average of 10% per year annual increase in its dividend, based on the past six years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy China Resources Pharmaceutical Group for the upcoming dividend? Earnings per share growth has been growing somewhat, and China Resources Pharmaceutical Group is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and China Resources Pharmaceutical Group is halfway there. There's a lot to like about China Resources Pharmaceutical Group, and we would prioritise taking a closer look at it.

While it's tempting to invest in China Resources Pharmaceutical Group for the dividends alone, you should always be mindful of the risks involved. For example - China Resources Pharmaceutical Group has 1 warning sign we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Valuation is complex, but we're helping make it simple.

Find out whether China Resources Pharmaceutical Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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.