Shandong Longji Machinery Co.,Ltd (SZSE:002363) Goes Ex-Dividend Soon

Shandong Longji Machinery Co.,Ltd (SZSE:002363) is about to trade ex-dividend in the next 3 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Shandong Longji MachineryLtd's shares on or after the 28th of June will not receive the dividend, which will be paid on the 28th of June.

The company's next dividend payment will be CN¥0.08 per share. Last year, in total, the company distributed CN¥0.08 to shareholders. Based on the last year's worth of payments, Shandong Longji MachineryLtd has a trailing yield of 1.4% on the current stock price of CN¥5.92. If you buy this business for its dividend, you should have an idea of whether Shandong Longji MachineryLtd's dividend is reliable and sustainable. As a result, readers should always check whether Shandong Longji MachineryLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Shandong Longji MachineryLtd

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. Its dividend payout ratio is 89% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. 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 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 Shandong Longji MachineryLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Shandong Longji MachineryLtd's earnings per share have fallen at approximately 14% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Shandong Longji MachineryLtd has lifted its dividend by approximately 4.8% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Shandong Longji MachineryLtd is already paying out 89% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.

To Sum It Up

Is Shandong Longji MachineryLtd worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Shandong Longji MachineryLtd's dividend merits.

With that being said, if dividends aren't your biggest concern with Shandong Longji MachineryLtd, you should know about the other risks facing this business. To help with this, we've discovered 2 warning signs for Shandong Longji MachineryLtd (1 is significant!) that you ought to be aware of before buying the shares.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com