Jinlongyu Group Co., Ltd. (SZSE:002882) Stock Goes Ex-Dividend In Just Three Days

Jinlongyu Group Co., Ltd. (SZSE:002882) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Therefore, if you purchase Jinlongyu Group's shares on or after the 30th of May, you won't be eligible to receive the dividend, when it is paid on the 30th of May.

The company's next dividend payment will be CN¥0.20 per share, and in the last 12 months, the company paid a total of CN¥0.20 per share. Based on the last year's worth of payments, Jinlongyu Group stock has a trailing yield of around 1.2% on the current share price of CN¥16.94. If you buy this business for its dividend, you should have an idea of whether Jinlongyu Group's dividend is reliable and sustainable. So we need to investigate whether Jinlongyu Group can afford its dividend, and if the dividend could grow.

See our latest analysis for Jinlongyu Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Jinlongyu Group's payout ratio is modest, at just 40% 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. The company paid out 105% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

While Jinlongyu Group's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Jinlongyu Group's ability to maintain its dividend.

Click here to see how much of its profit Jinlongyu Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Jinlongyu Group's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past six years, Jinlongyu Group has increased its dividend at approximately 12% a year on average.

Final Takeaway

Is Jinlongyu Group worth buying for its dividend? Earnings per share have barely grown in this time, and although Jinlongyu Group is paying out a low percentage of its profit, its dividend was not well covered by free cash flow. Only rarely do we find companies paying out a low percentage of their profits yet a high percentage of their cash flow, so we'd mark this as a concern. Overall, it's hard to get excited about Jinlongyu Group from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Jinlongyu Group, you should know about the other risks facing this business. For example, we've found 3 warning signs for Jinlongyu Group (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.

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.