Three Days Left Until Sichuan Chuanhuan Technology Co.,Ltd. (SZSE:300547) Trades Ex-Dividend

It looks like Sichuan Chuanhuan Technology Co.,Ltd. (SZSE:300547) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. In other words, investors can purchase Sichuan Chuanhuan TechnologyLtd's shares before the 14th of June in order to be eligible for the dividend, which will be paid on the 14th of June.

The company's next dividend payment will be CN¥0.277 per share, and in the last 12 months, the company paid a total of CN¥0.28 per share. Based on the last year's worth of payments, Sichuan Chuanhuan TechnologyLtd stock has a trailing yield of around 1.7% on the current share price of CN¥16.72. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Sichuan Chuanhuan TechnologyLtd

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. That's why it's good to see Sichuan Chuanhuan TechnologyLtd paying out a modest 33% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (55%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Sichuan Chuanhuan TechnologyLtd'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 how much of its profit Sichuan Chuanhuan TechnologyLtd paid out over the last 12 months.

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. With that in mind, we're encouraged by the steady growth at Sichuan Chuanhuan TechnologyLtd, with earnings per share up 6.0% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sichuan Chuanhuan TechnologyLtd's dividend payments per share have declined at 8.3% per year on average over the past eight years, which is uninspiring. Sichuan Chuanhuan TechnologyLtd is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Is Sichuan Chuanhuan TechnologyLtd worth buying for its dividend? Earnings per share have been growing at a steady rate, and Sichuan Chuanhuan TechnologyLtd paid out less than half its profits and more than half its free cash flow as dividends over the last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Sichuan Chuanhuan TechnologyLtd's dividend merits.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for Sichuan Chuanhuan TechnologyLtd that you should be aware of before investing in their shares.

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.