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 Shandong Jinjing Science & Technology Stock Co.,Ltd (SHSE:600586) is about to go ex-dividend in just 2 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. In other words, investors can purchase Shandong Jinjing Science & Technology StockLtd's shares before the 5th of June in order to be eligible for the dividend, which will be paid on the 5th of June.

The company's next dividend payment will be CN¥0.10 per share. Last year, in total, the company distributed CN¥0.10 to shareholders. Based on the last year's worth of payments, Shandong Jinjing Science & Technology StockLtd has a trailing yield of 1.6% on the current stock price of CN¥6.43. 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 Shandong Jinjing Science & Technology StockLtd can afford its dividend, and if the dividend could grow.

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. That's why it's good to see Shandong Jinjing Science & Technology StockLtd paying out a modest 26% of its earnings. 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. Fortunately, it paid out only 29% of its free cash flow in the past 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 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. It's encouraging to see Shandong Jinjing Science & Technology StockLtd has grown its earnings rapidly, up 48% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Shandong Jinjing Science & Technology StockLtd has delivered 8.9% dividend growth per year on average over the past six years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Shandong Jinjing Science & Technology StockLtd worth buying for its dividend? Shandong Jinjing Science & Technology StockLtd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past six years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Shandong Jinjing Science & Technology StockLtd, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for Shandong Jinjing Science & Technology StockLtd you should be aware of.

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.

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