It looks like AVE Science&Technology CO.,LTD (SHSE:688067) is about to go ex-dividend in the next 3 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase AVE Science&TechnologyLTD's shares before the 14th of July in order to be eligible for the dividend, which will be paid on the 14th of July.

The company's next dividend payment will be CN¥0.10 per share, on the back of last year when the company paid a total of CN¥0.10 to shareholders. Last year's total dividend payments show that AVE Science&TechnologyLTD has a trailing yield of 0.5% on the current share price of CN¥21.83. 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 AVE Science&TechnologyLTD has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for AVE Science&TechnologyLTD

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. That's why it's good to see AVE Science&TechnologyLTD paying out a modest 50% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out dividends equivalent to 323% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how AVE Science&TechnologyLTD intends to continue funding this dividend, or if it could be forced to cut the payment.

While AVE Science&TechnologyLTD's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were AVE Science&TechnologyLTD to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit AVE Science&TechnologyLTD paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by AVE Science&TechnologyLTD's 17% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Given that AVE Science&TechnologyLTD has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Is AVE Science&TechnologyLTD worth buying for its dividend? It's disappointing to see earnings per share declining, and this would ordinarily be enough to discourage us from most dividend stocks, even though AVE Science&TechnologyLTD is paying out less than half its income as dividends. However, it's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of AVE Science&TechnologyLTD.

Although, if you're still interested in AVE Science&TechnologyLTD and want to know more, you'll find it very useful to know what risks this stock faces. For instance, we've identified 3 warning signs for AVE Science&TechnologyLTD (1 is a bit concerning) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.