It looks like Qingdao NovelBeam Technology Co.,Ltd. (SHSE:688677) is about to go ex-dividend in the next three 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. In other words, investors can purchase Qingdao NovelBeam TechnologyLtd's shares before the 11th of June in order to be eligible for the dividend, which will be paid on the 11th of June.

The company's next dividend payment will be CN¥0.55 per share. Last year, in total, the company distributed CN¥0.55 to shareholders. Based on the last year's worth of payments, Qingdao NovelBeam TechnologyLtd stock has a trailing yield of around 1.4% on the current share price of CN¥39.93. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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. That's why it's good to see Qingdao NovelBeam TechnologyLtd paying out a modest 49% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 59% 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 Qingdao NovelBeam 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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Qingdao NovelBeam TechnologyLtd's earnings per share have risen 15% per annum over the last five years. Qingdao NovelBeam TechnologyLtd is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past three years, Qingdao NovelBeam TechnologyLtd has increased its dividend at approximately 24% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy Qingdao NovelBeam TechnologyLtd for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Qingdao NovelBeam TechnologyLtd, and we would prioritise taking a closer look at it.

In light of that, while Qingdao NovelBeam TechnologyLtd has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Qingdao NovelBeam TechnologyLtd and you should be aware of this before buying any shares.

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.