Income Investors Should Know That JiangSu Changling Hydraulic Co.,Ltd (SHSE:605389) Goes Ex-Dividend Soon

JiangSu Changling Hydraulic Co.,Ltd (SHSE:605389) stock is about to trade ex-dividend in 2 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Accordingly, JiangSu Changling HydraulicLtd investors that purchase the stock on or after the 29th of May will not receive the dividend, which will be paid on the 29th of May.

The company's next dividend payment will be CN¥0.40 per share. Last year, in total, the company distributed CN¥0.40 to shareholders. Based on the last year's worth of payments, JiangSu Changling HydraulicLtd has a trailing yield of 1.8% on the current stock price of CN¥22.51. 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 Changling HydraulicLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for JiangSu Changling HydraulicLtd

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. JiangSu Changling HydraulicLtd paid out 52% of its earnings to investors last year, a normal payout level for most businesses. 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 26% of its free cash flow in the past year.

It's positive to see that JiangSu Changling HydraulicLtd'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 Changling HydraulicLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. JiangSu Changling HydraulicLtd's earnings per share have fallen at approximately 14% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last three years, JiangSu Changling HydraulicLtd has lifted its dividend by approximately 23% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

To Sum It Up

Is JiangSu Changling HydraulicLtd worth buying for its dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

With that being said, if dividends aren't your biggest concern with JiangSu Changling HydraulicLtd, you should know about the other risks facing this business. Be aware that JiangSu Changling HydraulicLtd is showing 3 warning signs in our investment analysis, and 1 of those is a bit concerning...

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.