Is It Worth Considering Yantai Ishikawa Sealing Technology Co., Ltd. (SZSE:301020) For Its Upcoming Dividend?

Yantai Ishikawa Sealing Technology Co., Ltd. (SZSE:301020) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Yantai Ishikawa Sealing Technology investors that purchase the stock on or after the 29th of May will not receive the dividend, which will be paid on the 29th of May.

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 Yantai Ishikawa Sealing Technology has a trailing yield of 1.2% on the current share price of CN¥17.32. 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! So we need to investigate whether Yantai Ishikawa Sealing Technology can afford its dividend, and if the dividend could grow.

View our latest analysis for Yantai Ishikawa Sealing Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Yantai Ishikawa Sealing Technology's payout ratio is modest, at just 39% of profit. A useful secondary check can be to evaluate whether Yantai Ishikawa Sealing Technology generated enough free cash flow to afford its dividend. It paid out more than half (52%) of its free cash flow in the past year, which is within an average range for most companies.

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 Yantai Ishikawa Sealing Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Yantai Ishikawa Sealing Technology's earnings per share have fallen at approximately 8.7% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Yantai Ishikawa Sealing Technology has seen its dividend decline 14% per annum on average over the past two years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Has Yantai Ishikawa Sealing Technology got what it takes to maintain its dividend payments? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. To summarise, Yantai Ishikawa Sealing Technology looks okay on this analysis, although it doesn't appear a stand-out opportunity.

However if you're still interested in Yantai Ishikawa Sealing Technology as a potential investment, you should definitely consider some of the risks involved with Yantai Ishikawa Sealing Technology. To that end, you should learn about the 3 warning signs we've spotted with Yantai Ishikawa Sealing Technology (including 2 which are potentially serious).

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.