Juneyao Airlines Co., Ltd (SHSE:603885) is about to trade ex-dividend in the next two days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Juneyao Airlines' shares before the 26th of September in order to receive the dividend, which the company will pay on the 26th of September.

The company's next dividend payment will be CN¥0.09 per share. Last year, in total, the company distributed CN¥0.18 to shareholders. Calculating the last year's worth of payments shows that Juneyao Airlines has a trailing yield of 1.8% on the current share price of CN¥10.23. If you buy this business for its dividend, you should have an idea of whether Juneyao Airlines's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's 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. That's why it's good to see Juneyao Airlines paying out a modest 32% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.

It's positive to see that Juneyao Airlines'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Juneyao Airlines's earnings per share have fallen at approximately 5.0% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Juneyao Airlines's dividend payments per share have declined at 1.9% per year on average over the past nine years, which is uninspiring.

Final Takeaway

Should investors buy Juneyao Airlines for the upcoming dividend? Juneyao Airlines has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it's hard to get excited about Juneyao Airlines from a dividend perspective.

In light of that, while Juneyao Airlines has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Juneyao Airlines (1 is significant!) that you ought to be aware of before buying the shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.