Jiangnan Mould & Plastic Technology Co., Ltd. (SZSE:000700) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Jiangnan Mould & Plastic Technology Co., Ltd. (SZSE:000700) is about to go ex-dividend in just couple of days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Jiangnan Mould & Plastic Technology's shares before the 22nd of January in order to be eligible for the dividend, which will be paid on the 22nd of January.

The company's next dividend payment will be CN¥0.217 per share, and in the last 12 months, the company paid a total of CN¥0.22 per share. Based on the last year's worth of payments, Jiangnan Mould & Plastic Technology has a trailing yield of 3.0% on the current stock price of CN¥7.19. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Jiangnan Mould & Plastic Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Jiangnan Mould & Plastic Technology is paying out just 17% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 30% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Jiangnan Mould & Plastic Technology 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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Jiangnan Mould & Plastic Technology's earnings have been skyrocketing, up 121% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Jiangnan Mould & Plastic Technology has increased its dividend at approximately 31% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Jiangnan Mould & Plastic Technology got what it takes to maintain its dividend payments? Jiangnan Mould & Plastic Technology has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Jiangnan Mould & Plastic Technology looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Jiangnan Mould & Plastic Technology looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Jiangnan Mould & Plastic Technology has 2 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.