Tianjin Yiyi Hygiene Products Co.,Ltd (SZSE:001206) Is About To Go Ex-Dividend, And It Pays A 6.1% Yield

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Tianjin Yiyi Hygiene Products Co.,Ltd (SZSE:001206) is about to go ex-dividend in just 2 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a 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. This means that investors who purchase Tianjin Yiyi Hygiene ProductsLtd's shares on or after the 19th of December will not receive the dividend, which will be paid on the 19th of December.

The company's next dividend payment will be CN¥0.23 per share, and in the last 12 months, the company paid a total of CN¥1.08 per share. Calculating the last year's worth of payments shows that Tianjin Yiyi Hygiene ProductsLtd has a trailing yield of 6.1% on the current share price of CN¥17.64. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Tianjin Yiyi Hygiene ProductsLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tianjin Yiyi Hygiene ProductsLtd paid out more than half (74%) of its earnings last year, which is a regular payout ratio for most companies. 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. Over the last year, it paid out dividends equivalent to 238% of what it generated in free cash flow, a disturbingly high percentage. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.

Tianjin Yiyi Hygiene ProductsLtd does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Tianjin Yiyi Hygiene ProductsLtd paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Tianjin Yiyi Hygiene ProductsLtd's ability to maintain its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Tianjin Yiyi Hygiene ProductsLtd's earnings per share have been growing at 17% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tianjin Yiyi Hygiene ProductsLtd has delivered 9.8% dividend growth per year on average over the past three years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Has Tianjin Yiyi Hygiene ProductsLtd got what it takes to maintain its dividend payments? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 238% of its cashflow, which is uncomfortably high. In summary, it's hard to get excited about Tianjin Yiyi Hygiene ProductsLtd from a dividend perspective.

However if you're still interested in Tianjin Yiyi Hygiene ProductsLtd as a potential investment, you should definitely consider some of the risks involved with Tianjin Yiyi Hygiene ProductsLtd. In terms of investment risks, we've identified 1 warning sign with Tianjin Yiyi Hygiene ProductsLtd and understanding them should be part of your investment process.

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.