Interested In Shenzhen JPT Opto-Electronics' (SHSE:688025) Upcoming CN¥0.35057 Dividend? You Have Two Days Left

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shenzhen JPT Opto-Electronics Co., Ltd. (SHSE:688025) is about to trade ex-dividend in the next 2 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 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. Meaning, you will need to purchase Shenzhen JPT Opto-Electronics' shares before the 13th of June to receive the dividend, which will be paid on the 13th of June.

The company's upcoming dividend is CN¥0.35057 a share, following on from the last 12 months, when the company distributed a total of CN¥0.35 per share to shareholders. Based on the last year's worth of payments, Shenzhen JPT Opto-Electronics has a trailing yield of 0.9% on the current stock price of CN¥39.94. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Shenzhen JPT Opto-Electronics

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Shenzhen JPT Opto-Electronics's payout ratio is modest, at just 32% of profit. A useful secondary check can be to evaluate whether Shenzhen JPT Opto-Electronics generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last year.

It's positive to see that Shenzhen JPT Opto-Electronics'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Shenzhen JPT Opto-Electronics's 5.0% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past four years, Shenzhen JPT Opto-Electronics has increased its dividend at approximately 14% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Shenzhen JPT Opto-Electronics? Shenzhen JPT Opto-Electronics 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. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

In light of that, while Shenzhen JPT Opto-Electronics has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Shenzhen JPT Opto-Electronics you should know about.

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.