Is Consun Pharmaceutical Group Limited (HKG:1681) A Great Dividend Stock?
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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Consun Pharmaceutical Group Limited (HKG:1681) has recently paid dividends to shareholders, and currently yields 3.6%. Should it have a place in your portfolio? Let's take a look at Consun Pharmaceutical Group in more detail.
View our latest analysis for Consun Pharmaceutical Group
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is it the top 25% annual dividend yield payer?
Has it paid dividend every year without dramatically reducing payout in the past?
Has it increased its dividend per share amount over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will the company be able to keep paying dividend based on the future earnings growth?
Does Consun Pharmaceutical Group pass our checks?
The company currently pays out 32% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect 1681's payout to fall to 27% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.0%. However, EPS should increase to CN¥0.60, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Consun Pharmaceutical Group as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Consun Pharmaceutical Group has a yield of 3.6%, which is high for Pharmaceuticals stocks but still below the market's top dividend payers.
Next Steps:
Whilst there are few things you may like about Consun Pharmaceutical Group from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for 1681’s future growth? Take a look at our free research report of analyst consensus for 1681’s outlook.
Valuation: What is 1681 worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether 1681 is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
