Be Sure To Check Out Jiangxi Tianli Technology, INC. (SZSE:300399) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Jiangxi Tianli Technology, INC. (SZSE:300399) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Jiangxi Tianli Technology's shares on or after the 4th of June will not receive the dividend, which will be paid on the 4th of June.

The company's upcoming dividend is CN¥0.04 a share, following on from the last 12 months, when the company distributed a total of CN¥0.04 per share to shareholders. Looking at the last 12 months of distributions, Jiangxi Tianli Technology has a trailing yield of approximately 0.4% on its current stock price of CN¥9.18. 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 Jiangxi Tianli Technology can afford its dividend, and if the dividend could grow.

View our latest analysis for Jiangxi Tianli Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Jiangxi Tianli Technology paying out a modest 33% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 38% of its free cash flow in the past year.

It's positive to see that Jiangxi Tianli Technology'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 Jiangxi Tianli Technology 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 earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Jiangxi Tianli Technology's earnings are 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. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Jiangxi Tianli Technology has delivered an average of 0.6% per year annual increase in its dividend, based on the past nine years of dividend payments.

Final Takeaway

Is Jiangxi Tianli Technology worth buying for its dividend? 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. Generally we like to see both low payout ratios and strong earnings per share growth, but Jiangxi Tianli Technology is halfway there. Jiangxi Tianli Technology looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Jiangxi Tianli Technology for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Jiangxi Tianli Technology (1 makes us a bit uncomfortable!) that you ought to be aware of before buying the 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.

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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.