Shenzhen Mindray Bio-Medical Electronics Co., Ltd. (SZSE:300760) is about to trade ex-dividend in the next day or two. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Shenzhen Mindray Bio-Medical Electronics' shares before the 22nd of November to receive the dividend, which will be paid on the 22nd of November.

The company's next dividend payment will be CN¥4.30 per share, on the back of last year when the company paid a total of CN¥4.50 to shareholders. Calculating the last year's worth of payments shows that Shenzhen Mindray Bio-Medical Electronics has a trailing yield of 1.6% on the current share price of CN¥285.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Shenzhen Mindray Bio-Medical Electronics can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Shenzhen Mindray Bio-Medical Electronics

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Shenzhen Mindray Bio-Medical Electronics's payout ratio is modest, at just 48% of profit. 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. Dividends consumed 52% 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 Shenzhen Mindray Bio-Medical Electronics'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. That's why it's comforting to see Shenzhen Mindray Bio-Medical Electronics's earnings have been skyrocketing, up 32% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Shenzhen Mindray Bio-Medical Electronics has delivered 46% 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

Is Shenzhen Mindray Bio-Medical Electronics an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, Shenzhen Mindray Bio-Medical Electronics paid out less than half its earnings and a bit over half its free cash flow. Shenzhen Mindray Bio-Medical Electronics looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for Shenzhen Mindray Bio-Medical Electronics you should be aware of.

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.