Here's What We Like About China Resources Sanjiu Medical & Pharmaceutical's (SZSE:000999) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see China Resources Sanjiu Medical & Pharmaceutical Co., Ltd. (SZSE:000999) 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. Meaning, you will need to purchase China Resources Sanjiu Medical & Pharmaceutical's shares before the 14th of June to receive the dividend, which will be paid on the 14th of June.

The company's next dividend payment will be CN¥1.50 per share, and in the last 12 months, the company paid a total of CN¥1.50 per share. Looking at the last 12 months of distributions, China Resources Sanjiu Medical & Pharmaceutical has a trailing yield of approximately 2.3% on its current stock price of CN¥64.65. If you buy this business for its dividend, you should have an idea of whether China Resources Sanjiu Medical & Pharmaceutical's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for China Resources Sanjiu Medical & Pharmaceutical

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see China Resources Sanjiu Medical & Pharmaceutical paying out a modest 48% of its earnings. A useful secondary check can be to evaluate whether China Resources Sanjiu Medical & Pharmaceutical generated enough free cash flow to afford its dividend. Fortunately, it paid out only 27% of its free cash flow in the past year.

It's positive to see that China Resources Sanjiu Medical & 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, China Resources Sanjiu Medical & Pharmaceutical's earnings per share have been growing at 16% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, China Resources Sanjiu Medical & Pharmaceutical has increased its dividend at approximately 19% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has China Resources Sanjiu Medical & Pharmaceutical got what it takes to maintain its dividend payments? It's great that China Resources Sanjiu Medical & Pharmaceutical is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.

In light of that, while China Resources Sanjiu Medical & Pharmaceutical has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for China Resources Sanjiu Medical & Pharmaceutical that you should be aware of before investing in their shares.

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.