Lee's Pharmaceutical Holdings (HKG:950) Has Affirmed Its Dividend Of HK$0.01

Lee's Pharmaceutical Holdings Limited (HKG:950) has announced that it will pay a dividend of HK$0.01 per share on the 17th of June. This means the annual payment will be 1.6% of the current stock price, which is lower than the industry average.

View our latest analysis for Lee's Pharmaceutical Holdings

Lee's Pharmaceutical Holdings Is Paying Out More Than It Is Earning

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Lee's Pharmaceutical Holdings' earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

If the company can't turn things around, EPS could fall by 47.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 111%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from HK$0.075 total annually to HK$0.018. The dividend has fallen 76% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Lee's Pharmaceutical Holdings' EPS has fallen by approximately 47% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Lee's Pharmaceutical Holdings' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 4 warning signs for Lee's Pharmaceutical Holdings (of which 1 makes us a bit uncomfortable!) you should know about. 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.