Readers hoping to buy Jiangxi Bestoo Energy Co.,Ltd. (SZSE:001376) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Jiangxi Bestoo EnergyLtd's shares before the 20th of September in order to receive the dividend, which the company will pay on the 20th of September.

The company's next dividend payment will be CN¥0.05 per share, and in the last 12 months, the company paid a total of CN¥0.10 per share. Calculating the last year's worth of payments shows that Jiangxi Bestoo EnergyLtd has a trailing yield of 0.7% on the current share price of CN¥14.54. 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 Jiangxi Bestoo EnergyLtd can afford its dividend, and if the dividend could grow.

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. Jiangxi Bestoo EnergyLtd paid out a comfortable 39% of its profit last year. A useful secondary check can be to evaluate whether Jiangxi Bestoo EnergyLtd generated enough free cash flow to afford its dividend. Dividends consumed 57% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 how much of its profit Jiangxi Bestoo EnergyLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Jiangxi Bestoo EnergyLtd's earnings have been skyrocketing, up 31% per annum for the past five years.

Unfortunately Jiangxi Bestoo EnergyLtd has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Is Jiangxi Bestoo EnergyLtd worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Jiangxi Bestoo EnergyLtd, and we would prioritise taking a closer look at it.

Keen to explore more data on Jiangxi Bestoo EnergyLtd's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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.