Readers hoping to buy Shandong Yuma Sun-shading Technology Corp., Ltd. (SZSE:300993) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Shandong Yuma Sun-shading Technology's shares before the 18th of June in order to be eligible for the dividend, which will be paid on the 18th of June.

The company's next dividend payment will be CN¥0.18 per share. Last year, in total, the company distributed CN¥0.18 to shareholders. Based on the last year's worth of payments, Shandong Yuma Sun-shading Technology has a trailing yield of 1.9% on the current stock price of CN¥9.63. If you buy this business for its dividend, you should have an idea of whether Shandong Yuma Sun-shading Technology's dividend is reliable and sustainable. So we need to investigate whether Shandong Yuma Sun-shading Technology can afford its dividend, and if the dividend could grow.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shandong Yuma Sun-shading Technology paid out a comfortable 31% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 46% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Shandong Yuma Sun-shading Technology'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 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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Shandong Yuma Sun-shading Technology earnings per share are up 7.6% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Shandong Yuma Sun-shading Technology has delivered an average of 45% per year annual increase in its dividend, based on the past two years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Shandong Yuma Sun-shading Technology an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Shandong Yuma Sun-shading Technology 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. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Shandong Yuma Sun-shading Technology is halfway there. Overall we think this is an attractive combination and worthy of further research.

So while Shandong Yuma Sun-shading Technology looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Shandong Yuma Sun-shading Technology has 1 warning sign 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.