One Day Left Until Kuaijishan Shaoxing Rice Wine Co., Ltd. (SHSE:601579) Trades Ex-Dividend

It looks like Kuaijishan Shaoxing Rice Wine Co., Ltd. (SHSE:601579) is about to go ex-dividend in the next day or so. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Meaning, you will need to purchase Kuaijishan Shaoxing Rice Wine's shares before the 23rd of May to receive the dividend, which will be paid on the 23rd of May.

The company's upcoming dividend is CN¥0.21 a share, following on from the last 12 months, when the company distributed a total of CN¥0.21 per share to shareholders. Last year's total dividend payments show that Kuaijishan Shaoxing Rice Wine has a trailing yield of 1.8% on the current share price of CN¥11.50. If you buy this business for its dividend, you should have an idea of whether Kuaijishan Shaoxing Rice Wine's dividend is reliable and sustainable. So we need to investigate whether Kuaijishan Shaoxing Rice Wine can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Kuaijishan Shaoxing Rice Wine

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. Kuaijishan Shaoxing Rice Wine is paying out an acceptable 56% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 68% of its free cash flow as dividends, within the usual 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 Kuaijishan Shaoxing Rice Wine paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Kuaijishan Shaoxing Rice Wine's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

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, Kuaijishan Shaoxing Rice Wine has lifted its dividend by approximately 7.4% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid Kuaijishan Shaoxing Rice Wine? Kuaijishan Shaoxing Rice Wine has struggled to grow its earnings per share, 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 unsustainable. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Kuaijishan Shaoxing Rice Wine's dividend merits.

So if you want to do more digging on Kuaijishan Shaoxing Rice Wine, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 1 warning sign for Kuaijishan Shaoxing Rice Wine that we recommend you consider before investing in the business.

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.