Luzhou Laojiao Co.,Ltd (SZSE:000568) Will Pay A CN¥1.358 Dividend In Three Days

Readers hoping to buy Luzhou Laojiao Co.,Ltd (SZSE:000568) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Luzhou LaojiaoLtd's shares before the 24th of January in order to be eligible for the dividend, which will be paid on the 24th of January.

The company's next dividend payment will be CN¥1.358 per share. Last year, in total, the company distributed CN¥5.40 to shareholders. Last year's total dividend payments show that Luzhou LaojiaoLtd has a trailing yield of 4.5% on the current share price of CN¥118.70. If you buy this business for its dividend, you should have an idea of whether Luzhou LaojiaoLtd's dividend is reliable and sustainable. As a result, readers should always check whether Luzhou LaojiaoLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Luzhou LaojiaoLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Luzhou LaojiaoLtd paid out more than half (56%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Luzhou LaojiaoLtd generated enough free cash flow to afford its dividend. Over the last year it paid out 65% 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?

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Luzhou LaojiaoLtd's earnings have been skyrocketing, up 32% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Luzhou LaojiaoLtd could have strong prospects for future increases to the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Luzhou LaojiaoLtd has delivered an average of 16% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Luzhou LaojiaoLtd worth buying for its dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Luzhou LaojiaoLtd is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. To summarise, Luzhou LaojiaoLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

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

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.