Jacobson Pharma Corporation Limited (HKG:2633) Goes Ex-Dividend Soon

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 Jacobson Pharma Corporation Limited (HKG:2633) is about to go ex-dividend in just 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Therefore, if you purchase Jacobson Pharma's shares on or after the 25th of February, you won't be eligible to receive the dividend, when it is paid on the 2nd of April.

The company's next dividend payment will be HK$0.035 per share, on the back of last year when the company paid a total of HK$0.07 to shareholders. Last year's total dividend payments show that Jacobson Pharma has a trailing yield of 5.8% on the current share price of HK$1.21. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Jacobson Pharma has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Jacobson Pharma

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Jacobson Pharma is paying out an acceptable 50% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Jacobson Pharma generated enough free cash flow to afford its dividend. Luckily it paid out just 14% of its free cash flow 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 Jacobson Pharma paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Jacobson Pharma's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past eight years, Jacobson Pharma has increased its dividend at approximately 20% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Jacobson Pharma? It's unfortunate that earnings per share have not grown, and we'd note that Jacobson Pharma is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. To summarise, Jacobson Pharma looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Jacobson Pharma for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for Jacobson Pharma (1 is potentially serious) you should be aware of.

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.