Huaxia Eye Hospital Group Co.,Ltd. (SZSE:301267) stock is about to trade ex-dividend in two days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Huaxia Eye Hospital GroupLtd's shares before the 15th of July in order to be eligible for the dividend, which will be paid on the 15th of July.

The company's upcoming dividend is CN¥0.11 a share, following on from the last 12 months, when the company distributed a total of CN¥0.11 per share to shareholders. Calculating the last year's worth of payments shows that Huaxia Eye Hospital GroupLtd has a trailing yield of 0.5% on the current share price of CN¥20.60. If you buy this business for its dividend, you should have an idea of whether Huaxia Eye Hospital GroupLtd's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Huaxia Eye Hospital GroupLtd has a low and conservative payout ratio of just 14% of its income after tax. A useful secondary check can be to evaluate whether Huaxia Eye Hospital GroupLtd generated enough free cash flow to afford its dividend. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. That's why it's comforting to see Huaxia Eye Hospital GroupLtd's earnings have been skyrocketing, up 30% per annum for the past five years. Huaxia Eye Hospital GroupLtd is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. 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.

Given that Huaxia Eye Hospital GroupLtd 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 Huaxia Eye Hospital GroupLtd an attractive dividend stock, or better left on the shelf? We love that Huaxia Eye Hospital GroupLtd 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. Overall we think this is an attractive combination and worthy of further research.

Wondering what the future holds for Huaxia Eye Hospital GroupLtd? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

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