Only Two Days Left To Cash In On Doctorglasses ChainLtd's (SZSE:300622) Dividend

Doctorglasses Chain Co.,Ltd. (SZSE:300622) is about to trade ex-dividend in the next 2 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase Doctorglasses ChainLtd's shares on or after the 16th of January, you won't be eligible to receive the dividend, when it is paid on the 16th of January.

The company's next dividend payment will be CN¥0.11 per share, and in the last 12 months, the company paid a total of CN¥0.32 per share. Looking at the last 12 months of distributions, Doctorglasses ChainLtd has a trailing yield of approximately 0.7% on its current stock price of CN¥44.81. If you buy this business for its dividend, you should have an idea of whether Doctorglasses ChainLtd's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Doctorglasses ChainLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Doctorglasses ChainLtd distributed an unsustainably high 117% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether Doctorglasses ChainLtd generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 49% of the free cash flow it generated, which is a comfortable payout ratio.

It's good to see that while Doctorglasses ChainLtd's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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. For this reason, we're glad to see Doctorglasses ChainLtd's earnings per share have risen 13% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, eight years ago, Doctorglasses ChainLtd has lifted its dividend by approximately 15% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Doctorglasses ChainLtd? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Doctorglasses ChainLtd is paying out so much of its profit. All things considered, we are not particularly enthused about Doctorglasses ChainLtd from a dividend perspective.

While it's tempting to invest in Doctorglasses ChainLtd for the dividends alone, you should always be mindful of the risks involved. For example, Doctorglasses ChainLtd has 3 warning signs (and 1 which is significant) we think 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.