Panda Dairy Corporation (SZSE:300898) Is About To Go Ex-Dividend, And It Pays A 2.6% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Panda Dairy Corporation (SZSE:300898) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, Panda Dairy investors that purchase the stock on or after the 28th of May will not receive the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be CN¥0.50 per share, on the back of last year when the company paid a total of CN¥0.50 to shareholders. Calculating the last year's worth of payments shows that Panda Dairy has a trailing yield of 2.6% on the current share price of CN¥19.47. If you buy this business for its dividend, you should have an idea of whether Panda Dairy's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Panda Dairy

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Panda Dairy paid out more than half (53%) of its earnings last year, which is a regular payout ratio for 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. Luckily it paid out just 20% of its free cash flow last year.

It's positive to see that Panda Dairy'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 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 Panda Dairy'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.

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, Panda Dairy has lifted its dividend by approximately 49% a year on average.

To Sum It Up

Has Panda Dairy got what it takes to maintain its dividend payments? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. To summarise, Panda Dairy looks okay on this analysis, although it doesn't appear a stand-out opportunity.

However if you're still interested in Panda Dairy as a potential investment, you should definitely consider some of the risks involved with Panda Dairy. For example - Panda Dairy 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.