Jianzhijia Pharmaceutical Chain Group Co., Ltd. (SHSE:605266) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Jianzhijia Pharmaceutical Chain Group Co., Ltd. (SHSE:605266) stock is about to trade ex-dividend in 2 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Therefore, if you purchase Jianzhijia Pharmaceutical Chain Group's shares on or after the 6th of June, you won't be eligible to receive the dividend, when it is paid on the 6th of June.

The company's next dividend payment will be CN¥1.285 per share, and in the last 12 months, the company paid a total of CN¥1.28 per share. Calculating the last year's worth of payments shows that Jianzhijia Pharmaceutical Chain Group has a trailing yield of 2.6% on the current share price of CN¥49.48. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Jianzhijia Pharmaceutical Chain Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Jianzhijia Pharmaceutical Chain Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Jianzhijia Pharmaceutical Chain Group's payout ratio is modest, at just 42% of profit. A useful secondary check can be to evaluate whether Jianzhijia Pharmaceutical Chain Group generated enough free cash flow to afford its dividend. It distributed 44% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Jianzhijia Pharmaceutical Chain Group'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 the company's payout ratio, plus analyst estimates of its future dividends.

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. Fortunately for readers, Jianzhijia Pharmaceutical Chain Group's earnings per share have been growing at 15% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

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, Jianzhijia Pharmaceutical Chain Group has lifted its dividend by approximately 7.1% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Jianzhijia Pharmaceutical Chain Group worth buying for its dividend? We love that Jianzhijia Pharmaceutical Chain Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Jianzhijia Pharmaceutical Chain Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Jianzhijia Pharmaceutical Chain Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Jianzhijia Pharmaceutical Chain Group and you should be aware of these before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.