It looks like Mango Excellent Media Co., Ltd. (SZSE:300413) is about to go ex-dividend in the next 4 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. Meaning, you will need to purchase Mango Excellent Media's shares before the 10th of July to receive the dividend, which will be paid on the 10th of July.

The company's next dividend payment will be CN¥0.18 per share. Last year, in total, the company distributed CN¥0.18 to shareholders. Looking at the last 12 months of distributions, Mango Excellent Media has a trailing yield of approximately 0.9% on its current stock price of CN¥19.94. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Mango Excellent Media has a low and conservative payout ratio of just 9.7% of its income after tax. A useful secondary check can be to evaluate whether Mango Excellent Media generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Mango Excellent Media'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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Mango Excellent Media has grown its earnings rapidly, up 28% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Mango Excellent Media has delivered 16% dividend growth per year on average over the past four years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

From a dividend perspective, should investors buy or avoid Mango Excellent Media? We love that Mango Excellent Media is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Mango Excellent Media, and we would prioritise taking a closer look at it.

So while Mango Excellent Media looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Mango Excellent Media has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about.

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

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