Is It Worth Considering Zhejiang Jiaxin Silk Corp.,Ltd. (SZSE:002404) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Zhejiang Jiaxin Silk Corp.,Ltd. (SZSE:002404) is about to trade ex-dividend in the next four days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Zhejiang Jiaxin SilkLtd's shares before the 15th of May in order to receive the dividend, which the company will pay on the 15th of May.

The company's next dividend payment will be CN¥0.30 per share, and in the last 12 months, the company paid a total of CN¥0.30 per share. Last year's total dividend payments show that Zhejiang Jiaxin SilkLtd has a trailing yield of 4.9% on the current share price of CN¥6.10. If you buy this business for its dividend, you should have an idea of whether Zhejiang Jiaxin SilkLtd's dividend is reliable and sustainable. As a result, readers should always check whether Zhejiang Jiaxin SilkLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Zhejiang Jiaxin SilkLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 79% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether Zhejiang Jiaxin SilkLtd generated enough free cash flow to afford its dividend. Over the last year it paid out 70% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Zhejiang Jiaxin SilkLtd'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 Zhejiang Jiaxin SilkLtd 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Zhejiang Jiaxin SilkLtd, with earnings per share up 8.4% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Zhejiang Jiaxin SilkLtd has increased its dividend at approximately 11% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Zhejiang Jiaxin SilkLtd an attractive dividend stock, or better left on the shelf? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. To summarise, Zhejiang Jiaxin SilkLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

Want to learn more about Zhejiang Jiaxin SilkLtd's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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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.