Yongxing Special Materials Technology Co.,Ltd (SZSE:002756) stock is about to trade ex-dividend in three 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. 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. Meaning, you will need to purchase Yongxing Special Materials TechnologyLtd's shares before the 27th of May to receive the dividend, which will be paid on the 27th of May.

The company's next dividend payment will be CN¥0.50 per share, and in the last 12 months, the company paid a total of CN¥0.50 per share. Last year's total dividend payments show that Yongxing Special Materials TechnologyLtd has a trailing yield of 0.4% on the current share price of CN¥123.04. If you buy this business for its dividend, you should have an idea of whether Yongxing Special Materials TechnologyLtd's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Yongxing Special Materials TechnologyLtd

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. Yongxing Special Materials TechnologyLtd paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow 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.

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. It's encouraging to see Yongxing Special Materials TechnologyLtd has grown its earnings rapidly, up 41% a year for the past five years. Yongxing Special Materials TechnologyLtd looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Yongxing Special Materials TechnologyLtd has delivered an average of 28% per year annual increase in its dividend, based on the past six years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Has Yongxing Special Materials TechnologyLtd got what it takes to maintain its dividend payments? It's great that Yongxing Special Materials TechnologyLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Yongxing Special Materials TechnologyLtd is facing. In terms of investment risks, we've identified 1 warning sign with Yongxing Special Materials TechnologyLtd and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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