Only Two Days Left To Cash In On VATS Liquor Chain Store Management's (SZSE:300755) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see VATS Liquor Chain Store Management Joint Stock Co., Ltd. (SZSE:300755) is about to trade ex-dividend in the next 2 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 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. In other words, investors can purchase VATS Liquor Chain Store Management's shares before the 26th of June in order to be eligible for the dividend, which will be paid on the 26th of June.

The company's next dividend payment will be CN¥0.116 per share, and in the last 12 months, the company paid a total of CN¥0.12 per share. Calculating the last year's worth of payments shows that VATS Liquor Chain Store Management has a trailing yield of 0.8% on the current share price of CN¥14.39. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether VATS Liquor Chain Store Management has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for VATS Liquor Chain Store Management

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. VATS Liquor Chain Store Management paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 55% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that VATS Liquor Chain Store Management'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?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that VATS Liquor Chain Store Management's earnings are down 2.0% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last five years, VATS Liquor Chain Store Management has lifted its dividend by approximately 0.9% a year on average.

The Bottom Line

Should investors buy VATS Liquor Chain Store Management for the upcoming dividend? Earnings per share have fallen significantly, although at least VATS Liquor Chain Store Management paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. To summarise, VATS Liquor Chain Store Management looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you're not too concerned about VATS Liquor Chain Store Management's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Every company has risks, and we've spotted 2 warning signs for VATS Liquor Chain Store Management you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com