Why You Might Be Interested In Hubei Jumpcan Pharmaceutical Co., Ltd. (SHSE:600566) For Its Upcoming Dividend

Readers hoping to buy Hubei Jumpcan Pharmaceutical Co., Ltd. (SHSE:600566) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 Hubei Jumpcan Pharmaceutical's shares before the 17th of June in order to be eligible for the dividend, which will be paid on the 17th of June.

The company's next dividend payment will be CN¥1.30 per share, and in the last 12 months, the company paid a total of CN¥1.30 per share. Based on the last year's worth of payments, Hubei Jumpcan Pharmaceutical has a trailing yield of 3.6% on the current stock price of CN¥36.54. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Hubei Jumpcan Pharmaceutical

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Hubei Jumpcan Pharmaceutical paying out a modest 40% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Hubei Jumpcan Pharmaceutical'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 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. This is why it's a relief to see Hubei Jumpcan Pharmaceutical earnings per share are up 9.3% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past nine years, Hubei Jumpcan Pharmaceutical has increased its dividend at approximately 14% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Hubei Jumpcan Pharmaceutical? Earnings per share have been growing moderately, and Hubei Jumpcan Pharmaceutical is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Hubei Jumpcan Pharmaceutical is halfway there. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Hubei Jumpcan Pharmaceutical is facing. To help with this, we've discovered 1 warning sign for Hubei Jumpcan Pharmaceutical that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.