China Resources Pharmaceutical Group's (HKG:3320) Dividend Will Be Increased To CN¥0.1697

China Resources Pharmaceutical Group Limited (HKG:3320) will increase its dividend from last year's comparable payment on the 19th of July to CN¥0.1697. This makes the dividend yield about the same as the industry average at 3.3%.

See our latest analysis for China Resources Pharmaceutical Group

China Resources Pharmaceutical Group's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, China Resources Pharmaceutical Group was easily earning enough to 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 29.6%. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

China Resources Pharmaceutical Group Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2017, the dividend has gone from CN¥0.0796 total annually to CN¥0.154. This implies that the company grew its distributions at a yearly rate of about 9.9% over that duration. China Resources Pharmaceutical Group has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, China Resources Pharmaceutical Group's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, China Resources Pharmaceutical Group has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On China Resources Pharmaceutical Group's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for China Resources Pharmaceutical Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.