Income Investors Should Know That Sunlour Pigment Co.,Ltd (SZSE:301036) Goes Ex-Dividend Soon

It looks like Sunlour Pigment Co.,Ltd (SZSE:301036) is about to go ex-dividend in the next three 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 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. Thus, you can purchase Sunlour PigmentLtd's shares before the 8th of August in order to receive the dividend, which the company will pay on the 8th of August.

The company's next dividend payment will be CN¥0.30 per share, on the back of last year when the company paid a total of CN¥0.30 to shareholders. Based on the last year's worth of payments, Sunlour PigmentLtd has a trailing yield of 1.0% on the current stock price of CN¥29.98. 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 Sunlour PigmentLtd can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Sunlour PigmentLtd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Sunlour PigmentLtd paying out a modest 45% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 9.0% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Sunlour PigmentLtd'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 Sunlour PigmentLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Sunlour PigmentLtd's earnings per share have dropped 6.8% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sunlour PigmentLtd has seen its dividend decline 39% 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.

The Bottom Line

Is Sunlour PigmentLtd worth buying for its dividend? Sunlour PigmentLtd has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you'll want to research what risks Sunlour PigmentLtd is facing. To help with this, we've discovered 3 warning signs for Sunlour PigmentLtd (2 don't sit too well with us!) that you ought to be aware of before buying the shares.

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.

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