Beijing Tiantan Biological Products (SHSE:600161) Could Be A Buy For Its Upcoming Dividend

It looks like Beijing Tiantan Biological Products Co., Ltd. (SHSE:600161) is about to go ex-dividend in the next two 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. Meaning, you will need to purchase Beijing Tiantan Biological Products' shares before the 20th of June to receive the dividend, which will be paid on the 20th of June.

The company's upcoming dividend is CN¥0.15 a share, following on from the last 12 months, when the company distributed a total of CN¥0.15 per share to shareholders. Looking at the last 12 months of distributions, Beijing Tiantan Biological Products has a trailing yield of approximately 0.5% on its current stock price of CN¥30.96. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Beijing Tiantan Biological Products can afford its dividend, and if the dividend could grow.

View our latest analysis for Beijing Tiantan Biological Products

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. Beijing Tiantan Biological Products is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 8.3% of its cash flow last year.

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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Beijing Tiantan Biological Products's earnings per share have been growing at 16% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, Beijing Tiantan Biological Products has lifted its dividend by approximately 5.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Beijing Tiantan Biological Products is keeping back more of its profits to grow the business.

The Bottom Line

Is Beijing Tiantan Biological Products worth buying for its dividend? Beijing Tiantan Biological Products has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past seven years, but the conservative payout ratio makes the current dividend look sustainable. Beijing Tiantan Biological Products looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Ever wonder what the future holds for Beijing Tiantan Biological Products? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

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

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