Only Two Days Left To Cash In On Jiangsu Lettall ElectronicLtd's (SHSE:603629) 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 Jiangsu Lettall Electronic Co.,Ltd (SHSE:603629) is about to go ex-dividend in just two 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Jiangsu Lettall ElectronicLtd's shares on or after the 14th of June will not receive the dividend, which will be paid on the 14th of June.

The company's next dividend payment will be CN¥0.09 per share, on the back of last year when the company paid a total of CN¥0.09 to shareholders. Based on the last year's worth of payments, Jiangsu Lettall ElectronicLtd has a trailing yield of 0.5% on the current stock price of CN¥19.42. If you buy this business for its dividend, you should have an idea of whether Jiangsu Lettall ElectronicLtd's dividend is reliable and sustainable. As a result, readers should always check whether Jiangsu Lettall ElectronicLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Jiangsu Lettall ElectronicLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Jiangsu Lettall ElectronicLtd paid out a comfortable 38% of its profit last year. A useful secondary check can be to evaluate whether Jiangsu Lettall ElectronicLtd generated enough free cash flow to afford its dividend. It paid out 15% of its free cash flow as dividends last year, which is conservatively low.

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 Jiangsu Lettall ElectronicLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Jiangsu Lettall ElectronicLtd's earnings per share have dropped 13% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Jiangsu Lettall ElectronicLtd has seen its dividend decline 8.8% per annum on average over the past five years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Jiangsu Lettall ElectronicLtd? Jiangsu Lettall ElectronicLtd has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

While it's tempting to invest in Jiangsu Lettall ElectronicLtd for the dividends alone, you should always be mindful of the risks involved. For example, Jiangsu Lettall ElectronicLtd has 3 warning signs (and 1 which can't be ignored) we think you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.