Three Days Left To Buy Feilong Auto Components Co., Ltd. (SZSE:002536) Before The Ex-Dividend Date

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Feilong Auto Components Co., Ltd. (SZSE:002536) is about to go ex-dividend in just 3 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. Therefore, if you purchase Feilong Auto Components' shares on or after the 22nd of November, you won't be eligible to receive the dividend, when it is paid on the 22nd of November.

The company's next dividend payment will be CN¥0.10 per share. Last year, in total, the company distributed CN¥0.20 to shareholders. Calculating the last year's worth of payments shows that Feilong Auto Components has a trailing yield of 1.8% on the current share price of CN¥10.91. If you buy this business for its dividend, you should have an idea of whether Feilong Auto Components's dividend is reliable and sustainable. As a result, readers should always check whether Feilong Auto Components has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Feilong Auto Components

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Feilong Auto Components is paying out an acceptable 69% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Feilong Auto Components generated enough free cash flow to afford its dividend. It paid out more than half (67%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Feilong Auto Components'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?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Feilong Auto Components's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Feilong Auto Components has lifted its dividend by approximately 16% a year on average.

To Sum It Up

Is Feilong Auto Components worth buying for its dividend? Earnings per share have barely grown, and although Feilong Auto Components paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

However if you're still interested in Feilong Auto Components as a potential investment, you should definitely consider some of the risks involved with Feilong Auto Components. Our analysis shows 1 warning sign for Feilong Auto Components and you should be aware of it before buying any shares.

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.