ZJMI Environmental Energy Co., Ltd. (SHSE:603071) is about to trade ex-dividend in the next 2 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. Meaning, you will need to purchase ZJMI Environmental Energy's shares before the 24th of May to receive the dividend, which will be paid on the 24th of May.

The company's next dividend payment will be CN¥0.80 per share. Last year, in total, the company distributed CN¥0.80 to shareholders. Last year's total dividend payments show that ZJMI Environmental Energy has a trailing yield of 4.5% on the current share price of CN¥17.89. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for ZJMI Environmental Energy

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately ZJMI Environmental Energy's payout ratio is modest, at just 40% of profit. 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. Luckily it paid out just 14% of its free cash flow last 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 ZJMI Environmental Energy 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see ZJMI Environmental Energy's earnings per share have risen 15% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

We'd also point out that ZJMI Environmental Energy issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Given that ZJMI Environmental Energy has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Has ZJMI Environmental Energy got what it takes to maintain its dividend payments? We love that ZJMI Environmental Energy is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. ZJMI Environmental Energy looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks ZJMI Environmental Energy is facing. For example, we've found 1 warning sign for ZJMI Environmental Energy that we recommend you consider before investing in the business.

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.