Here's What We Like About Jiangxi Salt Industry Group's (SHSE:601065) Upcoming Dividend

It looks like Jiangxi Salt Industry Group Co., Ltd (SHSE:601065) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Therefore, if you purchase Jiangxi Salt Industry Group's shares on or after the 17th of June, you won't be eligible to receive the dividend, when it is paid on the 17th of June.

The company's upcoming dividend is CN¥0.35 a share, following on from the last 12 months, when the company distributed a total of CN¥0.35 per share to shareholders. Based on the last year's worth of payments, Jiangxi Salt Industry Group has a trailing yield of 3.7% on the current stock price of CN¥9.42. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Jiangxi Salt Industry Group can afford its dividend, and if the dividend could grow.

View our latest analysis for Jiangxi Salt Industry Group

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Jiangxi Salt Industry Group paying out a modest 44% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 23% of its free cash flow as dividends last year, which is conservatively low.

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 how much of its profit Jiangxi Salt Industry Group paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Jiangxi Salt Industry Group's earnings have been skyrocketing, up 42% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Jiangxi Salt Industry Group 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. It's hard to grow dividends per share when a company keeps creating new shares.

Unfortunately Jiangxi Salt Industry Group has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

From a dividend perspective, should investors buy or avoid Jiangxi Salt Industry Group? We love that Jiangxi Salt Industry Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Jiangxi Salt Industry Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Jiangxi Salt Industry Group for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Jiangxi Salt Industry Group that you should be aware of before investing in their shares.

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.