It looks like Suzhou Xingye Materials Technology Co.,Ltd. (SHSE:603928) is about to go ex-dividend in the next four 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Suzhou Xingye Materials TechnologyLtd's shares on or after the 18th of September will not receive the dividend, which will be paid on the 18th of September.

The company's next dividend payment will be CN¥0.04 per share, on the back of last year when the company paid a total of CN¥0.088 to shareholders. Based on the last year's worth of payments, Suzhou Xingye Materials TechnologyLtd has a trailing yield of 1.3% on the current stock price of CN¥7.06. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Suzhou Xingye Materials TechnologyLtd has been able to grow its dividends, or if the dividend might be cut.

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. Suzhou Xingye Materials TechnologyLtd paid out a comfortable 40% of its profit last year. A useful secondary check can be to evaluate whether Suzhou Xingye Materials TechnologyLtd generated enough free cash flow to afford its dividend. The good news is it paid out just 20% of its free cash flow in the last year.

It's positive to see that Suzhou Xingye Materials TechnologyLtd'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 Suzhou Xingye Materials TechnologyLtd paid out over the last 12 months.

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. With that in mind, we're discomforted by Suzhou Xingye Materials TechnologyLtd's 17% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Suzhou Xingye Materials TechnologyLtd's dividend payments per share have declined at 7.6% per year on average over the past seven years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

From a dividend perspective, should investors buy or avoid Suzhou Xingye Materials TechnologyLtd? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Suzhou Xingye Materials TechnologyLtd's dividend merits.

So while Suzhou Xingye Materials TechnologyLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 3 warning signs for Suzhou Xingye Materials TechnologyLtd (1 shouldn't be ignored!) that deserve your attention before investing in the shares.

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.