Only Four Days Left To Cash In On Changzhou Qianhong BiopharmaLTD's (SZSE:002550) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Changzhou Qianhong Biopharma CO.,LTD (SZSE:002550) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Therefore, if you purchase Changzhou Qianhong BiopharmaLTD's shares on or after the 29th of May, you won't be eligible to receive the dividend, when it is paid on the 29th of May.

The company's next dividend payment will be CN¥0.12 per share, and in the last 12 months, the company paid a total of CN¥0.12 per share. Last year's total dividend payments show that Changzhou Qianhong BiopharmaLTD has a trailing yield of 2.1% on the current share price of CN¥5.80. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Changzhou Qianhong BiopharmaLTD has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Changzhou Qianhong BiopharmaLTD

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. It paid out 78% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. 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. Luckily it paid out just 25% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Changzhou Qianhong BiopharmaLTD's earnings per share have remained effectively flat 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Changzhou Qianhong BiopharmaLTD has lifted its dividend by approximately 6.7% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Changzhou Qianhong BiopharmaLTD? The payout ratios appear reasonably conservative, which implies the dividend may be somewhat sustainable. Still, with earnings basically flat, Changzhou Qianhong BiopharmaLTD doesn't stand out from a dividend perspective. In summary, it's hard to get excited about Changzhou Qianhong BiopharmaLTD from a dividend perspective.

If you're not too concerned about Changzhou Qianhong BiopharmaLTD's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. In terms of investment risks, we've identified 2 warning signs with Changzhou Qianhong BiopharmaLTD and understanding them should be part of your investment process.

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.