Just Four Days Till Qinghai Huzhu TianYouDe Highland Barley Spirit Co., Ltd. (SZSE:002646) Will Be Trading Ex-Dividend

Readers hoping to buy Qinghai Huzhu TianYouDe Highland Barley Spirit Co., Ltd. (SZSE:002646) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Qinghai Huzhu TianYouDe Highland Barley Spirit's shares before the 25th of June in order to receive the dividend, which the company will pay on the 25th of June.

The company's next dividend payment will be CN¥0.13 per share, on the back of last year when the company paid a total of CN¥0.13 to shareholders. Based on the last year's worth of payments, Qinghai Huzhu TianYouDe Highland Barley Spirit has a trailing yield of 1.2% on the current stock price of CN¥10.75. If you buy this business for its dividend, you should have an idea of whether Qinghai Huzhu TianYouDe Highland Barley Spirit's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Qinghai Huzhu TianYouDe Highland Barley Spirit

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Qinghai Huzhu TianYouDe Highland Barley Spirit is paying out an acceptable 51% 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. Fortunately, it paid out only 36% of its free cash flow in the past year.

It's positive to see that Qinghai Huzhu TianYouDe Highland Barley Spirit'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 how much of its profit Qinghai Huzhu TianYouDe Highland Barley Spirit 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Qinghai Huzhu TianYouDe Highland Barley Spirit's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings growth has been slim and the company is paying out more than half 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Qinghai Huzhu TianYouDe Highland Barley Spirit has seen its dividend decline 8.0% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

Is Qinghai Huzhu TianYouDe Highland Barley Spirit an attractive dividend stock, or better left on the shelf? Earnings per share have been flat and Qinghai Huzhu TianYouDe Highland Barley Spirit's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. In summary, while it has some positive characteristics, we're not inclined to race out and buy Qinghai Huzhu TianYouDe Highland Barley Spirit today.

While it's tempting to invest in Qinghai Huzhu TianYouDe Highland Barley Spirit for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Qinghai Huzhu TianYouDe Highland Barley Spirit you should know about.

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.

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