LEPU ScienTech Medical Technology (Shanghai) (HKG:2291) Is Increasing Its Dividend To CN¥0.6737

LEPU ScienTech Medical Technology (Shanghai) Co., Ltd. (HKG:2291) will increase its dividend from last year's comparable payment on the 31st of July to CN¥0.6737. This takes the annual payment to 3.3% of the current stock price, which is about average for the industry.

LEPU ScienTech Medical Technology (Shanghai)'s Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, LEPU ScienTech Medical Technology (Shanghai) was paying out quite a large proportion of both earnings and cash flow, with the dividend being 157% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 34.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

See our latest analysis for LEPU ScienTech Medical Technology (Shanghai)

LEPU ScienTech Medical Technology (Shanghai) Is Still Building Its Track Record

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

LEPU ScienTech Medical Technology (Shanghai) Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. LEPU ScienTech Medical Technology (Shanghai) has seen EPS rising for the last five years, at 30% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which LEPU ScienTech Medical Technology (Shanghai) hasn't been doing.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for LEPU ScienTech Medical Technology (Shanghai) (1 shouldn't be ignored!) that you should be aware of before investing. Is LEPU ScienTech Medical Technology (Shanghai) not quite the opportunity you were looking for? Why not check out our selection of top 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.