Jenkem Technology Co., Ltd. (SHSE:688356) stock is about to trade ex-dividend in 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. Accordingly, Jenkem Technology investors that purchase the stock on or after the 18th of June will not receive the dividend, which will be paid on the 18th of June.

The company's next dividend payment will be CN¥0.574 per share, on the back of last year when the company paid a total of CN¥0.57 to shareholders. Last year's total dividend payments show that Jenkem Technology has a trailing yield of 0.9% on the current share price of CN¥65.35. If you buy this business for its dividend, you should have an idea of whether Jenkem Technology's dividend is reliable and sustainable. So we need to investigate whether Jenkem Technology can afford its dividend, and if the dividend could grow.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Jenkem Technology's payout ratio is modest, at just 42% of profit. A useful secondary check can be to evaluate whether Jenkem Technology generated enough free cash flow to afford its dividend. Over the last year it paid out 73% of its free cash flow as dividends, within the usual range for most companies.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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. For this reason, we're glad to see Jenkem Technology's earnings per share have risen 11% per annum over the last five years. Jenkem Technology has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Jenkem Technology has delivered 10% dividend growth per year on average over the past three years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Jenkem Technology an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, Jenkem Technology paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Jenkem Technology, and we would prioritise taking a closer look at it.

In light of that, while Jenkem Technology has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for Jenkem Technology and you should be aware of them before buying any shares.

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.

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