It looks like JiangXi BaiSheng Intelligent Technology Co., Ltd. (SZSE:301083) is about to go ex-dividend in the next two 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase JiangXi BaiSheng Intelligent Technology's shares on or after the 3rd of June, you won't be eligible to receive the dividend, when it is paid on the 3rd of June.
The company's next dividend payment will be CN¥0.12 per share. Last year, in total, the company distributed CN¥0.12 to shareholders. Based on the last year's worth of payments, JiangXi BaiSheng Intelligent Technology has a trailing yield of 0.8% on the current stock price of CN¥14.17. If you buy this business for its dividend, you should have an idea of whether JiangXi BaiSheng Intelligent Technology's dividend is reliable and sustainable. So we need to investigate whether JiangXi BaiSheng Intelligent Technology 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. JiangXi BaiSheng Intelligent Technology is paying out an acceptable 54% of its profit, a common payout level among most companies. 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 31% of its free cash flow in the past year.
It's positive to see that JiangXi BaiSheng Intelligent Technology'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 JiangXi BaiSheng Intelligent Technology paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by JiangXi BaiSheng Intelligent Technology's 9.8% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past two years, JiangXi BaiSheng Intelligent Technology has increased its dividend at approximately 85% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
To Sum It Up
Is JiangXi BaiSheng Intelligent Technology an attractive dividend stock, or better left on the shelf? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of JiangXi BaiSheng Intelligent Technology's dividend merits.
However if you're still interested in JiangXi BaiSheng Intelligent Technology as a potential investment, you should definitely consider some of the risks involved with JiangXi BaiSheng Intelligent Technology. To help with this, we've discovered 3 warning signs for JiangXi BaiSheng Intelligent Technology (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.