Be Sure To Check Out Tianjin Lisheng Pharmaceutical Co.,Ltd. (SZSE:002393) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Tianjin Lisheng Pharmaceutical Co.,Ltd. (SZSE:002393) is about to go ex-dividend in just 3 days. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Tianjin Lisheng PharmaceuticalLtd's shares on or after the 28th of May, you won't be eligible to receive the dividend, when it is paid on the 28th of May.

The company's next dividend payment will be CN¥0.60 per share. Last year, in total, the company distributed CN¥0.60 to shareholders. Last year's total dividend payments show that Tianjin Lisheng PharmaceuticalLtd has a trailing yield of 2.3% on the current share price of CN¥25.59. 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 Tianjin Lisheng PharmaceuticalLtd can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Tianjin Lisheng PharmaceuticalLtd

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 Tianjin Lisheng PharmaceuticalLtd paying out a modest 29% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Tianjin Lisheng PharmaceuticalLtd'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 Tianjin Lisheng PharmaceuticalLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Tianjin Lisheng PharmaceuticalLtd's earnings per share have been growing at 15% 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. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Tianjin Lisheng PharmaceuticalLtd dividends are largely the same as they were 10 years ago.

Final Takeaway

Is Tianjin Lisheng PharmaceuticalLtd worth buying for its dividend? Tianjin Lisheng PharmaceuticalLtd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Tianjin Lisheng PharmaceuticalLtd is facing. Every company has risks, and we've spotted 2 warning signs for Tianjin Lisheng PharmaceuticalLtd you should know about.

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.