Jiangsu Tongli Risheng Machinery Co., Ltd. (SHSE:605286) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Jiangsu Tongli Risheng Machinery Co., Ltd. (SHSE:605286) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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 Jiangsu Tongli Risheng Machinery's shares before the 30th of September in order to receive the dividend, which the company will pay on the 30th of September.

The company's next dividend payment will be CN¥0.12 per share. Last year, in total, the company distributed CN¥0.38 to shareholders. Calculating the last year's worth of payments shows that Jiangsu Tongli Risheng Machinery has a trailing yield of 1.1% on the current share price of CN¥22.44. 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 Jiangsu Tongli Risheng Machinery has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Jiangsu Tongli Risheng Machinery

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. Fortunately Jiangsu Tongli Risheng Machinery's payout ratio is modest, at just 33% of profit. 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. It paid out more than half (60%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Jiangsu Tongli Risheng Machinery'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 Jiangsu Tongli Risheng Machinery 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Jiangsu Tongli Risheng Machinery's earnings per share have risen 10% per annum over the last five years. Jiangsu Tongli Risheng Machinery is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, three years ago, Jiangsu Tongli Risheng Machinery has lifted its dividend by approximately 23% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has Jiangsu Tongli Risheng Machinery got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Jiangsu Tongli Risheng Machinery paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Jiangsu Tongli Risheng Machinery has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Jiangsu Tongli Risheng Machinery has 1 warning sign we think you should be aware of.

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.