Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Touchstone International Medical Science Co., Ltd. (SHSE:688013) is about to trade ex-dividend in the next 2 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. 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 Touchstone International Medical Science's shares on or after the 23rd of June, you won't be eligible to receive the dividend, when it is paid on the 23rd of June.

The company's next dividend payment will be CN¥0.20 per share, and in the last 12 months, the company paid a total of CN¥0.20 per share. Calculating the last year's worth of payments shows that Touchstone International Medical Science has a trailing yield of 1.0% on the current share price of CN¥19.89. 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 Touchstone International Medical Science has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Touchstone International Medical Science

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Touchstone International Medical Science paid out a comfortable 45% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 34% 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 Touchstone International Medical Science 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Touchstone International Medical Science's earnings per share plummeted 25% over the past year,which is rarely good news for the dividend.

Given that Touchstone International Medical Science has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

Is Touchstone International Medical Science an attractive dividend stock, or better left on the shelf? Touchstone International Medical Science 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, while it has some positive characteristics, we're not inclined to race out and buy Touchstone International Medical Science today.

So while Touchstone International Medical Science looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for Touchstone International Medical Science you should know about.

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.