It looks like Zhejiang Goldensea Hi-Tech Co., Ltd (SHSE:603311) is about to go ex-dividend in the next 3 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. Meaning, you will need to purchase Zhejiang Goldensea Hi-Tech's shares before the 17th of July to receive the dividend, which will be paid on the 17th of July.
The company's next dividend payment will be CN¥0.12 per share, on the back of last year when the company paid a total of CN¥0.12 to shareholders. Last year's total dividend payments show that Zhejiang Goldensea Hi-Tech has a trailing yield of 1.0% on the current share price of CN¥11.49. If you buy this business for its dividend, you should have an idea of whether Zhejiang Goldensea Hi-Tech's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Zhejiang Goldensea Hi-Tech
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Zhejiang Goldensea Hi-Tech paying out a modest 35% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 28% of its free cash flow in the past year.
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 how much of its profit Zhejiang Goldensea Hi-Tech paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Zhejiang Goldensea Hi-Tech's earnings are down 4.0% a year over the past five years.
Zhejiang Goldensea Hi-Tech also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Zhejiang Goldensea Hi-Tech has delivered an average of 13% per year annual increase in its dividend, based on the past seven years of dividend payments.
The Bottom Line
Is Zhejiang Goldensea Hi-Tech 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. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Zhejiang Goldensea Hi-Tech's dividend merits.
So while Zhejiang Goldensea Hi-Tech looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Zhejiang Goldensea Hi-Tech has 2 warning signs we think you should be aware of.
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.