Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Kunwu Jiuding Investment Holdings Co., Ltd. (SHSE:600053) is about to go ex-dividend in just 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. Accordingly, Kunwu Jiuding Investment Holdings investors that purchase the stock on or after the 20th of June will not receive the dividend, which will be paid on the 20th of June.
The company's next dividend payment will be CN¥0.16 per share. Last year, in total, the company distributed CN¥0.16 to shareholders. Looking at the last 12 months of distributions, Kunwu Jiuding Investment Holdings has a trailing yield of approximately 1.2% on its current stock price of CN¥12.83. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Kunwu Jiuding Investment Holdings
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. Kunwu Jiuding Investment Holdings paid out 64% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit Kunwu Jiuding Investment Holdings paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Kunwu Jiuding Investment Holdings's earnings per share have dropped 20% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kunwu Jiuding Investment Holdings has delivered 23% dividend growth per year on average over the past 10 years. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
To Sum It Up
Is Kunwu Jiuding Investment Holdings worth buying for its dividend? We're not overly enthused to see Kunwu Jiuding Investment Holdings's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Kunwu Jiuding Investment Holdings. To help with this, we've discovered 2 warning signs for Kunwu Jiuding Investment Holdings (1 is concerning!) that you ought to be aware of before buying the shares.
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.