Be Sure To Check Out Shenzhen Jdd Tech New Material Co., Ltd (SZSE:301538) Before It Goes Ex-Dividend

It looks like Shenzhen Jdd Tech New Material Co., Ltd (SZSE:301538) is about to go ex-dividend in the next three 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Shenzhen Jdd Tech New Material's shares before the 10th of October in order to be eligible for the dividend, which will be paid on the 10th of October.

The company's next dividend payment will be CN¥0.20 per share. 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.

View our latest analysis for Shenzhen Jdd Tech New Material

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shenzhen Jdd Tech New Material paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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.

Click here to see how much of its profit Shenzhen Jdd Tech New Material paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Shenzhen Jdd Tech New Material's earnings per share have risen 17% per annum over the last five years.

Shenzhen Jdd Tech New Material also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

This is Shenzhen Jdd Tech New Material's first year of paying a regular dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

Final Takeaway

Has Shenzhen Jdd Tech New Material got what it takes to maintain its dividend payments? We like that Shenzhen Jdd Tech New Material has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in Shenzhen Jdd Tech New Material for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Shenzhen Jdd Tech New Material that we strongly recommend you have a look at before investing in the company.

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.