Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sicher Elevator Co., Ltd. (SZSE:301056) is about to trade ex-dividend in the next 4 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Sicher Elevator's shares before the 13th of June in order to be eligible for the dividend, which will be paid on the 13th of June.

The company's next dividend payment will be CN¥0.05 per share, and in the last 12 months, the company paid a total of CN¥0.05 per share. Looking at the last 12 months of distributions, Sicher Elevator has a trailing yield of approximately 0.6% on its current stock price of CN¥8.53. If you buy this business for its dividend, you should have an idea of whether Sicher Elevator's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Sicher Elevator

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Sicher Elevator's payout ratio is modest, at just 25% of profit. A useful secondary check can be to evaluate whether Sicher Elevator generated enough free cash flow to afford its dividend. It distributed 41% of its free cash flow as dividends, a comfortable payout level for most companies.

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 Sicher Elevator 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Sicher Elevator's 8.8% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Unfortunately Sicher Elevator has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Has Sicher Elevator got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Sicher Elevator's dividend merits.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Sicher Elevator has 2 warning signs we think you should be aware of.

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.