It looks like Shaanxi Panlong Pharmaceutical Group Limited By Share Ltd (SZSE:002864) is about to go ex-dividend in the next 2 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 Shaanxi Panlong Pharmaceutical Group Limited By Share's shares before the 3rd of June in order to be eligible for the dividend, which will be paid on the 3rd of June.

The company's next dividend payment will be CN¥0.22 per share, and in the last 12 months, the company paid a total of CN¥0.22 per share. Based on the last year's worth of payments, Shaanxi Panlong Pharmaceutical Group Limited By Share has a trailing yield of 0.8% on the current stock price of CN¥28.98. If you buy this business for its dividend, you should have an idea of whether Shaanxi Panlong Pharmaceutical Group Limited By Share's dividend is reliable and sustainable. As a result, readers should always check whether Shaanxi Panlong Pharmaceutical Group Limited By Share has been able to grow its dividends, or if the dividend might be cut.

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. Shaanxi Panlong Pharmaceutical Group Limited By Share paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 23% of its free cash flow in the last 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?

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Shaanxi Panlong Pharmaceutical Group Limited By Share earnings per share are up 8.8% per annum over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

Shaanxi Panlong Pharmaceutical Group Limited By Share also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, six years ago, Shaanxi Panlong Pharmaceutical Group Limited By Share has lifted its dividend by approximately 14% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Shaanxi Panlong Pharmaceutical Group Limited By Share for the upcoming dividend? Earnings per share growth has been growing somewhat, and Shaanxi Panlong Pharmaceutical Group Limited By Share is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Shaanxi Panlong Pharmaceutical Group Limited By Share is halfway there. Shaanxi Panlong Pharmaceutical Group Limited By Share looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Shaanxi Panlong Pharmaceutical Group Limited By Share has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Shaanxi Panlong Pharmaceutical Group Limited By Share has 2 warning signs we think 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.