Is It Smart To Buy Yangzhou Jinquan Travelling Goods Co., Ltd. (SHSE:603307) Before It Goes Ex-Dividend?

Readers hoping to buy Yangzhou Jinquan Travelling Goods Co., Ltd. (SHSE:603307) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Therefore, if you purchase Yangzhou Jinquan Travelling Goods' shares on or after the 25th of September, you won't be eligible to receive the dividend, when it is paid on the 25th of September.

The company's next dividend payment will be CN¥0.40 per share, and in the last 12 months, the company paid a total of CN¥1.00 per share. Last year's total dividend payments show that Yangzhou Jinquan Travelling Goods has a trailing yield of 3.7% on the current share price of CN¥27.13. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Yangzhou Jinquan Travelling Goods

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Yangzhou Jinquan Travelling Goods paid out a comfortable 41% of its profit last year. A useful secondary check can be to evaluate whether Yangzhou Jinquan Travelling Goods generated enough free cash flow to afford its dividend. It paid out more than half (50%) of its free cash flow in the past year, which is within an average range for most companies.

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 how much of its profit Yangzhou Jinquan Travelling Goods paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Yangzhou Jinquan Travelling Goods's earnings per share have risen 13% per annum over the last five years. Yangzhou Jinquan Travelling Goods has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Unfortunately Yangzhou Jinquan Travelling Goods has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Is Yangzhou Jinquan Travelling Goods worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Yangzhou Jinquan Travelling Goods 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 Yangzhou Jinquan Travelling Goods has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Yangzhou Jinquan Travelling Goods 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.