Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Joinn Laboratories(China)Co.,Ltd. (SHSE:603127) is about to trade ex-dividend in the next two 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Joinn Laboratories(China)Co.Ltd's shares on or after the 31st of July will not receive the dividend, which will be paid on the 31st of July.

The company's next dividend payment will be CN¥0.16 per share. Last year, in total, the company distributed CN¥0.16 to shareholders. Calculating the last year's worth of payments shows that Joinn Laboratories(China)Co.Ltd has a trailing yield of 1.1% on the current share price of CN¥13.97. 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.

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. Joinn Laboratories(China)Co.Ltd's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Fortunately, it paid out only 38% of its free cash flow in the past year.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Joinn Laboratories(China)Co.Ltd was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last six years, Joinn Laboratories(China)Co.Ltd has lifted its dividend by approximately 26% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

We update our analysis on Joinn Laboratories(China)Co.Ltd every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

Should investors buy Joinn Laboratories(China)Co.Ltd for the upcoming dividend? It's hard to get used to Joinn Laboratories(China)Co.Ltd paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. All things considered, we are not particularly enthused about Joinn Laboratories(China)Co.Ltd from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for Joinn Laboratories(China)Co.Ltd that we recommend you consider before investing in the business.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com