Guangdong Jinming Machinery Co., Ltd. (SZSE:300281) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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 Guangdong Jinming Machinery's shares on or after the 4th of July, you won't be eligible to receive the dividend, when it is paid on the 4th of July.

The company's next dividend payment will be CN¥0.02 per share, on the back of last year when the company paid a total of CN¥0.02 to shareholders. Last year's total dividend payments show that Guangdong Jinming Machinery has a trailing yield of 0.4% on the current share price of CN¥4.51. If you buy this business for its dividend, you should have an idea of whether Guangdong Jinming Machinery's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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. Its dividend payout ratio is 85% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline.

Click here to see how much of its profit Guangdong Jinming Machinery paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Guangdong Jinming Machinery's 14% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

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, 10 years ago, Guangdong Jinming Machinery has lifted its dividend by approximately 1.8% a year on average.

Final Takeaway

Should investors buy Guangdong Jinming Machinery for the upcoming dividend? We're not overly enthused to see Guangdong Jinming Machinery's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.

If you want to look further into Guangdong Jinming Machinery, it's worth knowing the risks this business faces. Our analysis shows 3 warning signs for Guangdong Jinming Machinery that we strongly recommend you have a look at before investing in the company.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com