Jinan Acetate Chemical Co., Ltd. (TWSE:4763) Looks Interesting, And It's About To Pay A 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 Jinan Acetate Chemical Co., Ltd. (TWSE:4763) is about to go ex-dividend in just three 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 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. Thus, you can purchase Jinan Acetate Chemical's shares before the 12th of September in order to receive the dividend, which the company will pay on the 9th of October.

The company's next dividend payment will be NT$6.490555 per share, and in the last 12 months, the company paid a total of NT$26.00 per share. Last year's total dividend payments show that Jinan Acetate Chemical has a trailing yield of 2.7% on the current share price of NT$962.00. 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 Jinan Acetate Chemical can afford its dividend, and if the dividend could grow.

View our latest analysis for Jinan Acetate Chemical

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Jinan Acetate Chemical paid out a comfortable 37% of its profit last year. A useful secondary check can be to evaluate whether Jinan Acetate Chemical generated enough free cash flow to afford its dividend. It paid out 14% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Jinan Acetate Chemical'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 Jinan Acetate Chemical paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Jinan Acetate Chemical's earnings have been skyrocketing, up 92% per annum for the past five years. Jinan Acetate Chemical is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, eight years ago, Jinan Acetate Chemical has lifted its dividend by approximately 29% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Jinan Acetate Chemical got what it takes to maintain its dividend payments? Jinan Acetate Chemical has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past eight years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Jinan Acetate Chemical for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for Jinan Acetate Chemical (of which 1 is a bit unpleasant!) 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.