Jiangsu Hongde Special Parts Co.,Ltd. (SZSE:301163) Will Pay A CN¥0.25 Dividend In Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Jiangsu Hongde Special Parts Co.,Ltd. (SZSE:301163) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Jiangsu Hongde Special PartsLtd investors that purchase the stock on or after the 13th of June will not receive the dividend, which will be paid on the 13th of June.

The company's next dividend payment will be CN¥0.25 per share, and in the last 12 months, the company paid a total of CN¥0.25 per share. Based on the last year's worth of payments, Jiangsu Hongde Special PartsLtd has a trailing yield of 1.3% on the current stock price of CN¥19.95. 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.

See our latest analysis for Jiangsu Hongde Special PartsLtd

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. That's why it's good to see Jiangsu Hongde Special PartsLtd paying out a modest 48% 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. Over the last year it paid out 51% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Jiangsu Hongde Special PartsLtd'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 Hongde Special PartsLtd 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. So we're not too excited that Jiangsu Hongde Special PartsLtd's earnings are down 2.1% a year over the past five years.

Unfortunately Jiangsu Hongde Special PartsLtd has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Has Jiangsu Hongde Special PartsLtd got what it takes to maintain its dividend payments? Earnings per share have fallen significantly, although at least Jiangsu Hongde Special PartsLtd paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. In summary, while it has some positive characteristics, we're not inclined to race out and buy Jiangsu Hongde Special PartsLtd today.

With that being said, if dividends aren't your biggest concern with Jiangsu Hongde Special PartsLtd, you should know about the other risks facing this business. To that end, you should learn about the 3 warning signs we've spotted with Jiangsu Hongde Special PartsLtd (including 2 which don't sit too well with us).

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.