There's A Lot To Like About Shandong Pharmaceutical GlassLtd's (SHSE:600529) Upcoming CN¥0.30 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shandong Pharmaceutical Glass Co.Ltd (SHSE:600529) is about to trade ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Shandong Pharmaceutical GlassLtd's shares on or after the 11th of October will not receive the dividend, which will be paid on the 11th of October.

The company's next dividend payment will be CN¥0.30 per share, on the back of last year when the company paid a total of CN¥0.40 to shareholders. Based on the last year's worth of payments, Shandong Pharmaceutical GlassLtd has a trailing yield of 2.1% on the current stock price of CN¥29.12. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Shandong Pharmaceutical GlassLtd

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Shandong Pharmaceutical GlassLtd paid out 54% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 31% of its free cash flow in the past year.

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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Shandong Pharmaceutical GlassLtd's earnings per share have been growing at 17% a year for the past five years. Shandong Pharmaceutical GlassLtd has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Shandong Pharmaceutical GlassLtd also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Shandong Pharmaceutical GlassLtd has delivered an average of 23% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Shandong Pharmaceutical GlassLtd? We like Shandong Pharmaceutical GlassLtd's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Shandong Pharmaceutical GlassLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Curious what other investors think of Shandong Pharmaceutical GlassLtd? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.