Grand Pharmaceutical Group (HKG:512) Will Pay A Larger Dividend Than Last Year At HK$0.26

Grand Pharmaceutical Group Limited (HKG:512) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of June to HK$0.26. This takes the dividend yield to 6.1%, which shareholders will be pleased with.

See our latest analysis for Grand Pharmaceutical Group

Grand Pharmaceutical Group's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Grand Pharmaceutical Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 70.8%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

Grand Pharmaceutical Group Is Still Building Its Track Record

Grand Pharmaceutical Group's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 5 years was HK$0.086 in 2019, and the most recent fiscal year payment was HK$0.26. This means that it has been growing its distributions at 25% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Grand Pharmaceutical Group has impressed us by growing EPS at 14% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

We Really Like Grand Pharmaceutical Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 Grand Pharmaceutical Group that investors need to be conscious of moving forward. Is Grand Pharmaceutical Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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