Cisen Pharmaceutical (SHSE:603367) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy Cisen Pharmaceutical Co., Ltd. (SHSE:603367) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Cisen Pharmaceutical's shares before the 27th of June to receive the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be CN¥0.436 per share, on the back of last year when the company paid a total of CN¥0.44 to shareholders. Based on the last year's worth of payments, Cisen Pharmaceutical has a trailing yield of 3.0% on the current stock price of CN¥14.62. 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! As a result, readers should always check whether Cisen Pharmaceutical has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Cisen Pharmaceutical

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Cisen Pharmaceutical's payout ratio is modest, at just 37% of profit. 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. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Cisen 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 how much of its profit Cisen Pharmaceutical paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Cisen Pharmaceutical's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, six years ago, Cisen Pharmaceutical has lifted its dividend by approximately 18% a year on average.

The Bottom Line

Has Cisen Pharmaceutical got what it takes to maintain its dividend payments? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Cisen 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 Cisen Pharmaceutical is facing. For example, Cisen Pharmaceutical has 2 warning signs (and 1 which can't be ignored) we think you should know about.

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.

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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.

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