Grand Pharmaceutical Group's (HKG:512) Dividend Will Be HK$0.11

The board of Grand Pharmaceutical Group Limited (HKG:512) has announced that it will pay a dividend on the 21st of June, with investors receiving HK$0.11 per share. This payment means that the dividend yield will be 2.7%, which is around the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Grand Pharmaceutical Group's stock price has reduced by 34% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Grand Pharmaceutical Group

Grand Pharmaceutical Group's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Grand Pharmaceutical Group was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 39.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

Grand Pharmaceutical Group Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from HK$0.086 in 2019 to the most recent annual payment of HK$0.11. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Grand Pharmaceutical Group has grown earnings per share at 39% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Grand Pharmaceutical Group's Dividend

Overall, we like to see the dividend staying consistent, and we think Grand Pharmaceutical Group might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Grand 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.

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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.