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Is It Worth Considering Jerash Holdings (US), Inc. (NASDAQ:JRSH) For Its Upcoming Dividend?

Simply Wall St

Jerash Holdings (US), Inc. (NASDAQ:JRSH) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 8th of August, you won't be eligible to receive this dividend, when it is paid on the 19th of August.

Jerash Holdings (US)'s next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Calculating the last year's worth of payments shows that Jerash Holdings (US) has a trailing yield of 2.9% on the current share price of $6.9684. 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.

See our latest analysis for Jerash Holdings (US)

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. Jerash Holdings (US) has a low and conservative payout ratio of just 22% of its income after tax. 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. The good news is it paid out just 13% of its free cash flow in the 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 the company's payout ratio, plus analyst estimates of its future dividends.

NasdaqCM:JRSH Historical Dividend Yield, August 3rd 2019

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see Jerash Holdings (US)'s earnings per share have been shrinking at 3.4% a year over the previous five years.

Jerash Holdings (US) also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Unfortunately Jerash Holdings (US) has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Has Jerash Holdings (US) got what it takes to maintain its dividend payments? Jerash Holdings (US) has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it's hard to get excited about Jerash Holdings (US) from a dividend perspective.

Ever wonder what the future holds for Jerash Holdings (US)? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.