JDM JingDaMachine (Ningbo) Co.Ltd (SHSE:603088) Goes Ex-Dividend Soon

JDM JingDaMachine (Ningbo) Co.Ltd (SHSE:603088) is about to trade ex-dividend in the next three 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase JDM JingDaMachine (Ningbo)Ltd's shares before the 31st of May in order to receive the dividend, which the company will pay on the 31st of May.

The company's next dividend payment will be CN¥0.29 per share. Last year, in total, the company distributed CN¥0.29 to shareholders. Based on the last year's worth of payments, JDM JingDaMachine (Ningbo)Ltd has a trailing yield of 3.6% on the current stock price of CN¥8.06. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for JDM JingDaMachine (Ningbo)Ltd

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. JDM JingDaMachine (Ningbo)Ltd paid out 74% of its earnings to investors last year, a normal payout level for most businesses. 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. Dividends consumed 69% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that JDM JingDaMachine (Ningbo)Ltd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit JDM JingDaMachine (Ningbo)Ltd 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. It's encouraging to see JDM JingDaMachine (Ningbo)Ltd has grown its earnings rapidly, up 33% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past nine years, JDM JingDaMachine (Ningbo)Ltd has increased its dividend at approximately 26% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid JDM JingDaMachine (Ningbo)Ltd? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that JDM JingDaMachine (Ningbo)Ltd is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, it's hard to get excited about JDM JingDaMachine (Ningbo)Ltd from a dividend perspective.

So while JDM JingDaMachine (Ningbo)Ltd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - JDM JingDaMachine (Ningbo)Ltd has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking 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.