Beijing Tong Ren Tang Chinese Medicine (HKG:3613) Will Pay A Larger Dividend Than Last Year At HK$0.28

The board of Beijing Tong Ren Tang Chinese Medicine Company Limited (HKG:3613) has announced that it will be increasing its dividend on the 30th of June to HK$0.28. The announced payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

View our latest analysis for Beijing Tong Ren Tang Chinese Medicine

Beijing Tong Ren Tang Chinese Medicine's Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Beijing Tong Ren Tang Chinese Medicine'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.

Over the next year, EPS is forecast to expand by 9.6%. 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.

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

Looking back, Beijing Tong Ren Tang Chinese Medicine's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2013, the dividend has gone from HK$0.17 to HK$0.28. This means that it has been growing its distributions at 5.8% per annum 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.

Beijing Tong Ren Tang Chinese Medicine Could Grow Its Dividend

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. It's encouraging to see Beijing Tong Ren Tang Chinese Medicine has been growing its earnings per share at 7.7% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Beijing Tong Ren Tang Chinese Medicine's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Beijing Tong Ren Tang Chinese Medicine that investors should know about before committing capital to this stock. 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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