It looks like Jiang Su Suyan Jingshen Co.,Ltd (SHSE:603299) is about to go ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Jiang Su Suyan JingshenLtd's shares before the 7th of June in order to be eligible for the dividend, which will be paid on the 7th of June.

The company's next dividend payment will be CN¥0.425 per share, and in the last 12 months, the company paid a total of CN¥0.42 per share. Based on the last year's worth of payments, Jiang Su Suyan JingshenLtd stock has a trailing yield of around 4.3% on the current share price of CN¥9.98. If you buy this business for its dividend, you should have an idea of whether Jiang Su Suyan JingshenLtd's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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. That's why it's good to see Jiang Su Suyan JingshenLtd paying out a modest 43% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 35% 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 how much of its profit Jiang Su Suyan JingshenLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Jiang Su Suyan JingshenLtd's earnings have been skyrocketing, up 28% per annum for the past five years. Jiang Su Suyan JingshenLtd is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last eight years, Jiang Su Suyan JingshenLtd has lifted its dividend by approximately 32% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

From a dividend perspective, should investors buy or avoid Jiang Su Suyan JingshenLtd? Jiang Su Suyan JingshenLtd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past eight years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Jiang Su Suyan JingshenLtd for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Jiang Su Suyan JingshenLtd that you should be aware of before investing in their 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.