Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tianjin Yiyi Hygiene Products Co.,Ltd (SZSE:001206) is about to trade ex-dividend in the next day or two. 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. Therefore, if you purchase Tianjin Yiyi Hygiene ProductsLtd's shares on or after the 20th of December, you won't be eligible to receive the dividend, when it is paid on the 20th of December.

The company's next dividend payment will be CN¥0.25 per share, on the back of last year when the company paid a total of CN¥0.36 to shareholders. Looking at the last 12 months of distributions, Tianjin Yiyi Hygiene ProductsLtd has a trailing yield of approximately 2.2% on its current stock price of CN¥15.98. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Tianjin Yiyi Hygiene ProductsLtd

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. Tianjin Yiyi Hygiene ProductsLtd paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Tianjin Yiyi Hygiene ProductsLtd generated enough free cash flow to afford its dividend. Fortunately, it paid out only 26% of its free cash flow in the past 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Tianjin Yiyi Hygiene ProductsLtd's earnings have been skyrocketing, up 29% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Tianjin Yiyi Hygiene ProductsLtd could have strong prospects for future increases to the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tianjin Yiyi Hygiene ProductsLtd's dividend payments per share have declined at 34% per year on average over the past two years, which is uninspiring. Tianjin Yiyi Hygiene ProductsLtd is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Is Tianjin Yiyi Hygiene ProductsLtd worth buying for its dividend? Tianjin Yiyi Hygiene ProductsLtd's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Tianjin Yiyi Hygiene ProductsLtd is facing. Our analysis shows 1 warning sign for Tianjin Yiyi Hygiene ProductsLtd and you should be aware of it before buying any shares.

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.