Jiangsu Tongxingbao Intelligent Transportation Technology Co., Ltd. (SZSE:301339) stock is about to trade ex-dividend in 2 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Jiangsu Tongxingbao Intelligent Transportation Technology investors that purchase the stock on or after the 4th of July will not receive the dividend, which will be paid on the 4th of July.

The company's next dividend payment will be CN¥0.30 per share. Last year, in total, the company distributed CN¥0.30 to shareholders. Last year's total dividend payments show that Jiangsu Tongxingbao Intelligent Transportation Technology has a trailing yield of 1.5% on the current share price of CN¥19.83. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Jiangsu Tongxingbao Intelligent Transportation Technology has been able to grow its dividends, or if the dividend might be cut.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Jiangsu Tongxingbao Intelligent Transportation Technology paid out more than half (63%) of its earnings last year, which is a regular payout ratio for most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Jiangsu Tongxingbao Intelligent Transportation Technology'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 Jiangsu Tongxingbao Intelligent Transportation Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Jiangsu Tongxingbao Intelligent Transportation Technology earnings per share are up 9.8% per annum over the last five years. Decent historical earnings per share growth suggests Jiangsu Tongxingbao Intelligent Transportation Technology has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Unfortunately Jiangsu Tongxingbao Intelligent Transportation Technology has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

From a dividend perspective, should investors buy or avoid Jiangsu Tongxingbao Intelligent Transportation Technology? While earnings per share growth has been modest, Jiangsu Tongxingbao Intelligent Transportation Technology's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. All things considered, we are not particularly enthused about Jiangsu Tongxingbao Intelligent Transportation Technology from a dividend perspective.

In light of that, while Jiangsu Tongxingbao Intelligent Transportation Technology has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Jiangsu Tongxingbao Intelligent Transportation Technology that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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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