Is It Worth Considering Jacobson Pharma Corporation Limited (HKG:2633) For Its Upcoming Dividend?
Jacobson Pharma Corporation Limited (HKG:2633) stock is about to trade ex-dividend in 3 days time. You will need to purchase shares before the 30th of August to receive the dividend, which will be paid on the 12th of September.
Jacobson Pharma's next dividend payment will be HK$0.03 per share, on the back of last year when the company paid a total of HK$0.045 to shareholders. Based on the last year's worth of payments, Jacobson Pharma has a trailing yield of 3.4% on the current stock price of HK$1.32. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Jacobson Pharma
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Jacobson Pharma's payout ratio is modest, at just 35% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 25% of its free cash flow in the past year.
It's positive to see that Jacobson Pharma's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Jacobson Pharma's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Jacobson Pharma also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Jacobson Pharma has delivered 41% dividend growth per year on average over the past 3 years.
Final Takeaway
From a dividend perspective, should investors buy or avoid Jacobson Pharma? While it's not great to see that earnings per share are effectively flat over the three-year period we checked, at least the payout ratios are low and conservative. All things considered, we are not particularly enthused about Jacobson Pharma from a dividend perspective.
Ever wonder what the future holds for Jacobson Pharma? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.
