Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see China Reform Culture Holdings Co., Ltd. (SHSE:600636) is about to trade ex-dividend in the next 4 days. 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. 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 China Reform Culture Holdings' shares before the 29th of June in order to be eligible for the dividend, which will be paid on the 29th of June.

The company's next dividend payment will be CN¥0.04 per share, on the back of last year when the company paid a total of CN¥0.04 to shareholders. Looking at the last 12 months of distributions, China Reform Culture Holdings has a trailing yield of approximately 0.5% on its current stock price of CN¥7.48. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether China Reform Culture Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for China Reform Culture Holdings

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. China Reform Culture Holdings reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If China Reform Culture Holdings didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 49% of its free cash flow as dividends, a comfortable payout level for most companies.

Click here to see how much of its profit China Reform Culture Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. China Reform Culture Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. China Reform Culture Holdings has delivered 8.2% dividend growth per year on average over the past 10 years.

We update our analysis on China Reform Culture Holdings every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Is China Reform Culture Holdings worth buying for its dividend? It's hard to get used to China Reform Culture Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Although, if you're still interested in China Reform Culture Holdings and want to know more, you'll find it very useful to know what risks this stock faces. To that end, you should learn about the 2 warning signs we've spotted with China Reform Culture Holdings (including 1 which shouldn't be ignored).

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.