Just Three Days Till Shanghai Lily&Beauty Cosmetics Co.,Ltd. (SHSE:605136) Will Be Trading Ex-Dividend

Shanghai Lily&Beauty Cosmetics Co.,Ltd. (SHSE:605136) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. In other words, investors can purchase Shanghai Lily&Beauty CosmeticsLtd's shares before the 6th of June in order to be eligible for the dividend, which will be paid on the 6th of June.

The company's next dividend payment will be CN¥0.05 per share, on the back of last year when the company paid a total of CN¥0.05 to shareholders. Looking at the last 12 months of distributions, Shanghai Lily&Beauty CosmeticsLtd has a trailing yield of approximately 0.8% on its current stock price of CN¥6.55. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Shanghai Lily&Beauty CosmeticsLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for Shanghai Lily&Beauty CosmeticsLtd

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 Shanghai Lily&Beauty CosmeticsLtd paying out a modest 50% of its earnings. 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. The good news is it paid out just 0.006% of its free cash flow in the 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 how much of its profit Shanghai Lily&Beauty CosmeticsLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Shanghai Lily&Beauty CosmeticsLtd's earnings per share have plummeted approximately 31% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Shanghai Lily&Beauty CosmeticsLtd's dividend payments per share have declined at 35% per year on average over the past three years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Has Shanghai Lily&Beauty CosmeticsLtd got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, it's hard to get excited about Shanghai Lily&Beauty CosmeticsLtd from a dividend perspective.

While it's tempting to invest in Shanghai Lily&Beauty CosmeticsLtd for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Shanghai Lily&Beauty CosmeticsLtd 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.