Jiangsu Wujin Stainless Steel Pipe Group CO.,LTD. (SHSE:603878) Stock Goes Ex-Dividend In Just Four Days

Readers hoping to buy Jiangsu Wujin Stainless Steel Pipe Group CO.,LTD. (SHSE:603878) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Accordingly, Jiangsu Wujin Stainless Steel Pipe GroupLTD investors that purchase the stock on or after the 17th of June will not receive the dividend, which will be paid on the 17th of June.

The company's next dividend payment will be CN¥0.53 per share, on the back of last year when the company paid a total of CN¥0.53 to shareholders. Based on the last year's worth of payments, Jiangsu Wujin Stainless Steel Pipe GroupLTD stock has a trailing yield of around 6.4% on the current share price of CN¥8.23. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Jiangsu Wujin Stainless Steel Pipe GroupLTD can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Jiangsu Wujin Stainless Steel Pipe GroupLTD

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 86% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. 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. Dividends consumed 73% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Jiangsu Wujin Stainless Steel Pipe GroupLTD'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?

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. For this reason, we're glad to see Jiangsu Wujin Stainless Steel Pipe GroupLTD's earnings per share have risen 12% per annum over the last five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

Jiangsu Wujin Stainless Steel Pipe GroupLTD 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. Since the start of our data, seven years ago, Jiangsu Wujin Stainless Steel Pipe GroupLTD has lifted its dividend by approximately 35% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

From a dividend perspective, should investors buy or avoid Jiangsu Wujin Stainless Steel Pipe GroupLTD? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Jiangsu Wujin Stainless Steel Pipe GroupLTD's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 86% and 73% respectively. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for Jiangsu Wujin Stainless Steel Pipe GroupLTD 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.