There's A Lot To Like About Asian Star Anchor Chain Jiangsu's (SHSE:601890) Upcoming CN¥0.105 Dividend

Readers hoping to buy Asian Star Anchor Chain Co., Ltd. Jiangsu (SHSE:601890) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Asian Star Anchor Chain Jiangsu's shares before the 17th of June to receive the dividend, which will be paid on the 17th of June.

The company's next dividend payment will be CN¥0.105 per share, and in the last 12 months, the company paid a total of CN¥0.10 per share. Looking at the last 12 months of distributions, Asian Star Anchor Chain Jiangsu has a trailing yield of approximately 1.4% on its current stock price of CN¥7.74. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Asian Star Anchor Chain Jiangsu has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Asian Star Anchor Chain Jiangsu

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Asian Star Anchor Chain Jiangsu's payout ratio is modest, at just 41% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out more than three-quarters (82%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Asian Star Anchor Chain Jiangsu has grown its earnings rapidly, up 31% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Asian Star Anchor Chain Jiangsu has delivered 18% dividend growth per year on average over the past nine years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

From a dividend perspective, should investors buy or avoid Asian Star Anchor Chain Jiangsu? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Asian Star Anchor Chain Jiangsu, and we would prioritise taking a closer look at it.

In light of that, while Asian Star Anchor Chain Jiangsu has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Asian Star Anchor Chain Jiangsu 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.