Jacobson Pharma Corporation Limited (HKG:2633) stock is about to trade ex-dividend in 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. This means that investors who purchase Jacobson Pharma's shares on or after the 18th of December will not receive the dividend, which will be paid on the 10th of January.

The company's upcoming dividend is HK$0.025 a share, following on from the last 12 months, when the company distributed a total of HK$0.049 per share to shareholders. Based on the last year's worth of payments, Jacobson Pharma has a trailing yield of 7.7% on the current stock price of HK$0.63. If you buy this business for its dividend, you should have an idea of whether Jacobson Pharma's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Jacobson Pharma

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 Jacobson Pharma's payout ratio is modest, at just 38% of profit. 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. It paid out 18% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Jacobson Pharma's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Jacobson Pharma paid out over the last 12 months.

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. With that in mind, we're encouraged by the steady growth at Jacobson Pharma, with earnings per share up 2.8% on average over the last five years. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, seven years ago, Jacobson Pharma has lifted its dividend by approximately 17% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Jacobson Pharma worth buying for its dividend? Earnings per share growth has been growing somewhat, and Jacobson Pharma is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Jacobson Pharma is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Jacobson Pharma, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To that end, you should learn about the 2 warning signs we've spotted with Jacobson Pharma (including 1 which is concerning).

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.