Zhejiang Jasan Holding Group Co., Ltd. (SHSE:603558) is about to trade ex-dividend in the next 4 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. 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 Zhejiang Jasan Holding Group's shares before the 6th of May in order to receive the dividend, which the company will pay on the 6th of May.

The company's upcoming dividend is CN¥0.25 a share, following on from the last 12 months, when the company distributed a total of CN¥0.50 per share to shareholders. Last year's total dividend payments show that Zhejiang Jasan Holding Group has a trailing yield of 4.4% on the current share price of CN¥11.39. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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. Zhejiang Jasan Holding Group distributed an unsustainably high 124% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. A useful secondary check can be to evaluate whether Zhejiang Jasan Holding Group generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (77%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Zhejiang Jasan Holding Group fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 Zhejiang Jasan Holding Group's earnings per share have risen 11% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Zhejiang Jasan Holding Group has delivered 17% dividend growth per year on average over the past nine years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Zhejiang Jasan Holding Group an attractive dividend stock, or better left on the shelf? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. In summary, it's hard to get excited about Zhejiang Jasan Holding Group from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Zhejiang Jasan Holding Group, you should know about the other risks facing this business. In terms of investment risks, we've identified 1 warning sign with Zhejiang Jasan Holding Group and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.