Dezhou United Petroleum Technology Co.,Ltd. (SZSE:301158) is about to trade ex-dividend in the next three 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Dezhou United Petroleum TechnologyLtd investors that purchase the stock on or after the 17th of May will not receive the dividend, which will be paid on the 17th of May.

The company's next dividend payment will be CN¥0.305443 per share, and in the last 12 months, the company paid a total of CN¥0.30 per share. Last year's total dividend payments show that Dezhou United Petroleum TechnologyLtd has a trailing yield of 1.9% on the current share price of CN¥15.50. 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 Dezhou United Petroleum TechnologyLtd has been able to grow its dividends, or if the dividend might be cut.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Dezhou United Petroleum TechnologyLtd paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Dezhou United Petroleum TechnologyLtd generated enough free cash flow to afford its dividend. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Dezhou United Petroleum 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 Dezhou United Petroleum TechnologyLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Dezhou United Petroleum TechnologyLtd earnings per share are up 8.9% per annum over the last five years. Decent historical earnings per share growth suggests Dezhou United Petroleum TechnologyLtd has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Dezhou United Petroleum TechnologyLtd has delivered an average of 58% 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.

The Bottom Line

Is Dezhou United Petroleum TechnologyLtd worth buying for its dividend? Earnings per share have been growing modestly and Dezhou United Petroleum TechnologyLtd paid out a bit over half of its earnings and free cash flow last year. To summarise, Dezhou United Petroleum TechnologyLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you're not too concerned about Dezhou United Petroleum TechnologyLtd's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Case in point: We've spotted 1 warning sign for Dezhou United Petroleum TechnologyLtd 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.