Here's What We Like About Yifeng Pharmacy Chain's (SHSE:603939) Upcoming Dividend

It looks like Yifeng Pharmacy Chain Co., Ltd. (SHSE:603939) is about to go ex-dividend in the next 3 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Yifeng Pharmacy Chain's shares before the 7th of June to receive the dividend, which will be paid on the 7th of June.

The company's next dividend payment will be CN¥0.50 per share, and in the last 12 months, the company paid a total of CN¥0.50 per share. Last year's total dividend payments show that Yifeng Pharmacy Chain has a trailing yield of 1.1% on the current share price of CN¥44.08. If you buy this business for its dividend, you should have an idea of whether Yifeng Pharmacy Chain's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Yifeng Pharmacy Chain

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 Yifeng Pharmacy Chain's payout ratio is modest, at just 34% 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. What's good is that dividends were well covered by free cash flow, with the company paying out 10% of its cash flow last year.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Yifeng Pharmacy Chain has grown its earnings rapidly, up 27% a year for the past five years. Yifeng Pharmacy Chain is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, nine years ago, Yifeng Pharmacy Chain has lifted its dividend by approximately 11% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Yifeng Pharmacy Chain got what it takes to maintain its dividend payments? It's great that Yifeng Pharmacy Chain is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Yifeng Pharmacy Chain for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Yifeng Pharmacy Chain that we recommend you consider before investing in the business.

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.