Be Sure To Check Out Hangzhou Juheshun New Material Co.,LTD (SHSE:605166) Before It Goes Ex-Dividend

It looks like Hangzhou Juheshun New Material Co.,LTD (SHSE:605166) is about to go ex-dividend in the next 3 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Hangzhou Juheshun New MaterialLTD's shares before the 21st of June in order to be eligible for the dividend, which will be paid on the 21st of June.

The company's next dividend payment will be CN¥0.285 per share, and in the last 12 months, the company paid a total of CN¥0.28 per share. Based on the last year's worth of payments, Hangzhou Juheshun New MaterialLTD stock has a trailing yield of around 2.6% on the current share price of CN¥10.77. 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.

Check out our latest analysis for Hangzhou Juheshun New MaterialLTD

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Hangzhou Juheshun New MaterialLTD's payout ratio is modest, at just 42% of profit. 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. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Hangzhou Juheshun New MaterialLTD'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 how much of its profit Hangzhou Juheshun New MaterialLTD paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Hangzhou Juheshun New MaterialLTD, with earnings per share up 9.8% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, three years ago, Hangzhou Juheshun New MaterialLTD has lifted its dividend by approximately 42% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Should investors buy Hangzhou Juheshun New MaterialLTD for the upcoming dividend? Earnings per share growth has been modest, and it's interesting that Hangzhou Juheshun New MaterialLTD is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. To summarise, Hangzhou Juheshun New MaterialLTD looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Hangzhou Juheshun New MaterialLTD for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Hangzhou Juheshun New MaterialLTD and understanding them should be part of your investment process.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com