Beijing Tong Ren Tang Chinese Medicine (HKG:3613) Has Announced That It Will Be Increasing Its Dividend To HK$0.28

Beijing Tong Ren Tang Chinese Medicine Company Limited (HKG:3613) will increase its dividend on the 30th of June to HK$0.28. This makes the dividend yield about the same as the industry average at 2.6%.

Check out our latest analysis for Beijing Tong Ren Tang Chinese Medicine

Beijing Tong Ren Tang Chinese Medicine's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Beijing Tong Ren Tang Chinese Medicine's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 9.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

Beijing Tong Ren Tang Chinese Medicine's Dividend Has Lacked Consistency

It's comforting to see that Beijing Tong Ren Tang Chinese Medicine has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The first annual payment during the last 9 years was HK$0.17 in 2013, and the most recent fiscal year payment was HK$0.28. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year 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 Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Beijing Tong Ren Tang Chinese Medicine has impressed us by growing EPS at 7.7% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Beijing Tong Ren Tang Chinese Medicine's prospects of growing its dividend payments in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Beijing Tong Ren Tang Chinese Medicine for free with public analyst estimates for the company. Is Beijing Tong Ren Tang Chinese Medicine not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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