Wuchan Zhongda Geron Co.,Ltd. (SZSE:002722) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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 Wuchan Zhongda GeronLtd's shares before the 4th of July in order to be eligible for the dividend, which will be paid on the 4th of July.

The company's next dividend payment will be CN¥0.19 per share, and in the last 12 months, the company paid a total of CN¥0.19 per share. Calculating the last year's worth of payments shows that Wuchan Zhongda GeronLtd has a trailing yield of 1.7% on the current share price of CN¥11.30. If you buy this business for its dividend, you should have an idea of whether Wuchan Zhongda GeronLtd's dividend is reliable and sustainable. So we need to investigate whether Wuchan Zhongda GeronLtd 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 Wuchan Zhongda GeronLtd's payout ratio is modest, at just 28% of profit. 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. The good news is it paid out just 9.0% of its free cash flow in the last year.

It's positive to see that Wuchan Zhongda GeronLtd'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 Wuchan Zhongda GeronLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Wuchan Zhongda GeronLtd's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wuchan Zhongda GeronLtd has delivered 9.0% dividend growth per year on average over the past 10 years.

The Bottom Line

Should investors buy Wuchan Zhongda GeronLtd for the upcoming dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Wuchan Zhongda GeronLtd today.

So while Wuchan Zhongda GeronLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for Wuchan Zhongda GeronLtd and you should be aware of this before buying any shares.

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.

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