Sichuan Joyou Digital Technologies Co.,Ltd. (SZSE:301172) Will Pay A CN¥0.20 Dividend In Four Days

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 Sichuan Joyou Digital Technologies Co.,Ltd. (SZSE:301172) is about to go ex-dividend in just four 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Sichuan Joyou Digital TechnologiesLtd's shares before the 3rd of June in order to be eligible for the dividend, which will be paid on the 3rd of June.

The company's next dividend payment will be CN¥0.20 per share, on the back of last year when the company paid a total of CN¥0.40 to shareholders. Calculating the last year's worth of payments shows that Sichuan Joyou Digital TechnologiesLtd has a trailing yield of 1.3% on the current share price of CN¥30.36. 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 Sichuan Joyou Digital TechnologiesLtd can afford its dividend, and if the dividend could grow.

See our latest analysis for Sichuan Joyou Digital TechnologiesLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sichuan Joyou Digital TechnologiesLtd paid out 53% of its earnings to investors last year, a normal payout level for most businesses. 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. Fortunately, it paid out only 40% of its free cash flow in the past 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 Sichuan Joyou Digital TechnologiesLtd 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Sichuan Joyou Digital TechnologiesLtd'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.

We'd also point out that Sichuan Joyou Digital TechnologiesLtd issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Unfortunately Sichuan Joyou Digital TechnologiesLtd has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Should investors buy Sichuan Joyou Digital TechnologiesLtd for the upcoming dividend? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. Overall, it's hard to get excited about Sichuan Joyou Digital TechnologiesLtd from a dividend perspective.

If you want to look further into Sichuan Joyou Digital TechnologiesLtd, it's worth knowing the risks this business faces. For example - Sichuan Joyou Digital TechnologiesLtd has 2 warning signs we think you should be aware of.

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.