There's A Lot To Like About Sichuan Meifeng Chemical Industry's (SZSE:000731) Upcoming CN¥0.170157 Dividend

Sichuan Meifeng Chemical Industry Co., Ltd. (SZSE:000731) is about to trade ex-dividend in the next 4 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. Meaning, you will need to purchase Sichuan Meifeng Chemical Industry's shares before the 17th of June to receive the dividend, which will be paid on the 17th of June.

The company's next dividend payment will be CN¥0.170157 per share. Last year, in total, the company distributed CN¥0.17 to shareholders. Based on the last year's worth of payments, Sichuan Meifeng Chemical Industry stock has a trailing yield of around 2.5% on the current share price of CN¥6.90. 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! As a result, readers should always check whether Sichuan Meifeng Chemical Industry has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Sichuan Meifeng Chemical Industry

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. That's why it's good to see Sichuan Meifeng Chemical Industry paying out a modest 34% of its 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. Fortunately, it paid out only 39% of its free cash flow in the past year.

It's positive to see that Sichuan Meifeng Chemical Industry'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 Sichuan Meifeng Chemical Industry paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Sichuan Meifeng Chemical Industry, with earnings per share up 6.4% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sichuan Meifeng Chemical Industry has delivered 11% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has Sichuan Meifeng Chemical Industry got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Sichuan Meifeng Chemical Industry is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Sichuan Meifeng Chemical Industry is halfway there. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Sichuan Meifeng Chemical Industry for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Sichuan Meifeng Chemical Industry that we recommend you consider before investing in the business.

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.