Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hangzhou Shunwang Technology Co,Ltd (SZSE:300113) is about to trade ex-dividend in the next 2 days. 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. Accordingly, Hangzhou Shunwang Technology CoLtd 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¥0.080321 per share, on the back of last year when the company paid a total of CN¥0.08 to shareholders. Based on the last year's worth of payments, Hangzhou Shunwang Technology CoLtd stock has a trailing yield of around 0.7% on the current share price of CN¥10.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Hangzhou Shunwang Technology CoLtd has been able to grow its dividends, or if the dividend might be cut.

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. Hangzhou Shunwang Technology CoLtd paid out a comfortable 30% of its profit last year. 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 14% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Hangzhou Shunwang Technology CoLtd'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?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Hangzhou Shunwang Technology CoLtd's earnings per share have fallen at approximately 10% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hangzhou Shunwang Technology CoLtd has delivered an average of 4.8% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Final Takeaway

Has Hangzhou Shunwang Technology CoLtd got what it takes to maintain its dividend payments? Hangzhou Shunwang Technology CoLtd 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, while it has some positive characteristics, we're not inclined to race out and buy Hangzhou Shunwang Technology CoLtd today.

In light of that, while Hangzhou Shunwang Technology CoLtd has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Hangzhou Shunwang Technology CoLtd has 1 warning sign we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com