Interested In Zhongyin Babi Food's (SHSE:605338) Upcoming CN¥0.40 Dividend? You Have Two Days Left

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Zhongyin Babi Food Co., Ltd. (SHSE:605338) is about to go ex-dividend in just two 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 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 Zhongyin Babi Food's shares before the 16th of May to receive the dividend, which will be paid on the 16th of May.

The company's next dividend payment will be CN¥0.40 per share, and in the last 12 months, the company paid a total of CN¥0.40 per share. Last year's total dividend payments show that Zhongyin Babi Food has a trailing yield of 2.3% on the current share price of CN¥17.48. If you buy this business for its dividend, you should have an idea of whether Zhongyin Babi Food's dividend is reliable and sustainable. So we need to investigate whether Zhongyin Babi Food can afford its dividend, and if the dividend could grow.

View our latest analysis for Zhongyin Babi Food

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. Zhongyin Babi Food paid out a comfortable 46% of its profit last year. A useful secondary check can be to evaluate whether Zhongyin Babi Food generated enough free cash flow to afford its dividend. Over the last year it paid out 57% 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 the company's payout ratio, plus analyst estimates of its future dividends.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Zhongyin Babi Food'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. In the last three years, Zhongyin Babi Food has lifted its dividend by approximately 36% a year on average.

Final Takeaway

Should investors buy Zhongyin Babi Food for the upcoming dividend? Earnings per share have been flat over the three-year timeframe we consider, and Zhongyin Babi Food paid out less than half its earnings and more than half its free cashflow over the last year. All things considered, we are not particularly enthused about Zhongyin Babi Food from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Zhongyin Babi Food has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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

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.