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 Jiamei Food Packaging (Chuzhou) Co.,Ltd (SZSE:002969) is about to go ex-dividend in just three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Jiamei Food Packaging (Chuzhou)Ltd's shares before the 6th of September to receive the dividend, which will be paid on the 6th of September.

The company's upcoming dividend is CN¥0.015 a share, following on from the last 12 months, when the company distributed a total of CN¥0.03 per share to shareholders. Based on the last year's worth of payments, Jiamei Food Packaging (Chuzhou)Ltd stock has a trailing yield of around 1.1% on the current share price of CN¥2.85. If you buy this business for its dividend, you should have an idea of whether Jiamei Food Packaging (Chuzhou)Ltd's dividend is reliable and sustainable. So we need to investigate whether Jiamei Food Packaging (Chuzhou)Ltd can afford its dividend, and if the dividend could grow.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Jiamei Food Packaging (Chuzhou)Ltd paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (75%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Jiamei Food Packaging (Chuzhou)Ltd'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 Jiamei Food Packaging (Chuzhou)Ltd 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that Jiamei Food Packaging (Chuzhou)Ltd's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last four years, Jiamei Food Packaging (Chuzhou)Ltd has lifted its dividend by approximately 12% a year on average.

Final Takeaway

Is Jiamei Food Packaging (Chuzhou)Ltd an attractive dividend stock, or better left on the shelf? Its earnings per share are effectively flat in recent times. The company paid out less than half its income and more than half its cash flow as dividends to shareholders. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

However if you're still interested in Jiamei Food Packaging (Chuzhou)Ltd as a potential investment, you should definitely consider some of the risks involved with Jiamei Food Packaging (Chuzhou)Ltd. For instance, we've identified 2 warning signs for Jiamei Food Packaging (Chuzhou)Ltd (1 is significant) you should be aware of.

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.