Only Three Days Left To Cash In On Beijing Foyou PharmaLTD's (SHSE:601089) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Beijing Foyou Pharma CO.,LTD (SHSE:601089) is about to trade ex-dividend in the next three 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Beijing Foyou PharmaLTD's shares before the 14th of June in order to receive the dividend, which the company will pay on the 14th of June.

The company's upcoming dividend is CN¥0.50 a share, following on from the last 12 months, when the company distributed a total of CN¥0.50 per share to shareholders. Calculating the last year's worth of payments shows that Beijing Foyou PharmaLTD has a trailing yield of 3.4% on the current share price of CN¥14.53. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Beijing Foyou PharmaLTD

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Beijing Foyou PharmaLTD paid out a comfortable 47% of its profit last year. 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 paid out 93% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Beijing Foyou PharmaLTD paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Beijing Foyou PharmaLTD's ability to maintain its dividend.

Click here to see how much of its profit Beijing Foyou PharmaLTD 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Beijing Foyou PharmaLTD's earnings per share have risen 13% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Unfortunately Beijing Foyou PharmaLTD has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Is Beijing Foyou PharmaLTD an attractive dividend stock, or better left on the shelf? We like that Beijing Foyou PharmaLTD 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. In summary, it's hard to get excited about Beijing Foyou PharmaLTD from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 2 warning signs for Beijing Foyou PharmaLTD (1 makes us a bit uncomfortable) you should be aware of.

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.