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It Might Not Be A Great Idea To Buy Sihuan Pharmaceutical Holdings Group Ltd. (HKG:460) For Its Next Dividend

Simply Wall St

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sihuan Pharmaceutical Holdings Group Ltd. (HKG:460) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 17th of October in order to receive the dividend, which the company will pay on the 30th of October.

Sihuan Pharmaceutical Holdings Group's upcoming dividend is HK$0.004 a share, following on from the last 12 months, when the company distributed a total of HK$0.02 per share to shareholders. Looking at the last 12 months of distributions, Sihuan Pharmaceutical Holdings Group has a trailing yield of approximately 1.7% on its current stock price of HK$1.13. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Sihuan Pharmaceutical Holdings Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Sihuan Pharmaceutical Holdings Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Sihuan Pharmaceutical Holdings Group paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Sihuan Pharmaceutical Holdings Group didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 12% of its free cash flow in the last year.

Click here to see how much of its profit Sihuan Pharmaceutical Holdings Group paid out over the last 12 months.

SEHK:460 Historical Dividend Yield, October 13th 2019

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Sihuan Pharmaceutical Holdings Group was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sihuan Pharmaceutical Holdings Group's dividend payments per share have declined at 1.4% per year on average over the past eight years, which is uninspiring.

We update our analysis on Sihuan Pharmaceutical Holdings Group every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Sihuan Pharmaceutical Holdings Group an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Keen to explore more data on Sihuan Pharmaceutical Holdings Group's financial performance? Check out our visualisation of its historical revenue and earnings growth.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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.