Teyi Pharmaceutical Group Co.,Ltd (SZSE:002728) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Teyi Pharmaceutical GroupLtd investors that purchase the stock on or after the 24th of April will not receive the dividend, which will be paid on the 24th of April.
The company's next dividend payment will be CN¥0.50 per share, and in the last 12 months, the company paid a total of CN¥0.50 per share. Last year's total dividend payments show that Teyi Pharmaceutical GroupLtd has a trailing yield of 3.2% on the current share price of CN¥15.81. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Teyi Pharmaceutical GroupLtd paid out 65% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Teyi Pharmaceutical GroupLtd generated enough free cash flow to afford its dividend. Teyi Pharmaceutical GroupLtd paid out more free cash flow than it generated - 132%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Teyi Pharmaceutical GroupLtd paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Teyi Pharmaceutical GroupLtd's ability to maintain its dividend.
Click here to see how much of its profit Teyi Pharmaceutical GroupLtd paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Teyi Pharmaceutical GroupLtd earnings per share are up 4.5% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, Teyi Pharmaceutical GroupLtd has lifted its dividend by approximately 28% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Is Teyi Pharmaceutical GroupLtd worth buying for its dividend? Teyi Pharmaceutical GroupLtd is paying out a reasonable percentage of its income and an uncomfortably high 132% of its cash flow as dividends. At least earnings per share have been growing steadily. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Teyi Pharmaceutical GroupLtd.
With that in mind though, if the poor dividend characteristics of Teyi Pharmaceutical GroupLtd don't faze you, it's worth being mindful of the risks involved with this business. Every company has risks, and we've spotted 2 warning signs for Teyi Pharmaceutical GroupLtd you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.