Jiangsu Huaxin New Material Co.,Ltd. (SZSE:300717) Will Pay A CN¥0.20 Dividend In Two Days

Jiangsu Huaxin New Material Co.,Ltd. (SZSE:300717) stock is about to trade ex-dividend in two 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Jiangsu Huaxin New MaterialLtd investors that purchase the stock on or after the 19th of June will not receive the dividend, which will be paid on the 19th of June.

The company's next dividend payment will be CN¥0.20 per share, on the back of last year when the company paid a total of CN¥0.20 to shareholders. Calculating the last year's worth of payments shows that Jiangsu Huaxin New MaterialLtd has a trailing yield of 1.3% on the current share price of CN¥15.95. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Jiangsu Huaxin New MaterialLtd

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Jiangsu Huaxin New MaterialLtd's payout ratio is modest, at just 47% 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. It paid out 81% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that Jiangsu Huaxin 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 Jiangsu Huaxin New MaterialLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Jiangsu Huaxin New MaterialLtd's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

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, six years ago, Jiangsu Huaxin New MaterialLtd has lifted its dividend by approximately 8.1% a year on average.

The Bottom Line

Is Jiangsu Huaxin New MaterialLtd worth buying for its dividend? Its earnings per share are effectively flat in recent times. The company paid out less than half its income and more than half its cash flow as dividends to shareholders. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

So if you want to do more digging on Jiangsu Huaxin New MaterialLtd, you'll find it worthwhile knowing the risks that this stock faces. For instance, we've identified 2 warning signs for Jiangsu Huaxin New MaterialLtd (1 doesn't sit too well with us) you should be aware of.

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.

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