Dian Diagnostics Group Co.,Ltd. (SZSE:300244) is about to trade 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. This means that investors who purchase Dian Diagnostics GroupLtd's shares on or after the 13th of June will not receive the dividend, which will be paid on the 13th of June.
The company's next dividend payment will be CN¥0.06 per share, on the back of last year when the company paid a total of CN¥0.06 to shareholders. Calculating the last year's worth of payments shows that Dian Diagnostics GroupLtd has a trailing yield of 0.5% on the current share price of CN¥12.91. If you buy this business for its dividend, you should have an idea of whether Dian Diagnostics GroupLtd's dividend is reliable and sustainable. 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. Dian Diagnostics GroupLtd is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Dian Diagnostics GroupLtd generated enough free cash flow to afford its dividend. The good news is it paid out just 23% of its free cash flow in the last year.
It's positive to see that Dian Diagnostics GroupLtd'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 shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Dian Diagnostics GroupLtd's earnings per share have fallen at approximately 17% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Dian Diagnostics GroupLtd has increased its dividend at approximately 1.8% a year on average.
Final Takeaway
Is Dian Diagnostics GroupLtd an attractive dividend stock, or better left on the shelf? 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. All things considered, we are not particularly enthused about Dian Diagnostics GroupLtd from a dividend perspective.
So while Dian Diagnostics GroupLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Dian Diagnostics GroupLtd has 1 warning sign we think 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.