Zhejiang Zhaofeng Mechanical and Electronic Co.,Ltd. (SZSE:300695) Will Pay A CN¥0.705048 Dividend In Three Days

Zhejiang Zhaofeng Mechanical and Electronic Co.,Ltd. (SZSE:300695) stock is about to trade ex-dividend in three 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. 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. In other words, investors can purchase Zhejiang Zhaofeng Mechanical and ElectronicLtd's shares before the 11th of October in order to be eligible for the dividend, which will be paid on the 11th of October.

The company's next dividend payment will be CN¥0.705048 per share, on the back of last year when the company paid a total of CN¥1.40 to shareholders. Calculating the last year's worth of payments shows that Zhejiang Zhaofeng Mechanical and ElectronicLtd has a trailing yield of 3.3% on the current share price of CN¥42.76. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Zhejiang Zhaofeng Mechanical and ElectronicLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Zhejiang Zhaofeng Mechanical and ElectronicLtd's payout ratio is modest, at just 29% of profit. 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 0.09% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Zhejiang Zhaofeng Mechanical and ElectronicLtd'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 Zhejiang Zhaofeng Mechanical and ElectronicLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Zhejiang Zhaofeng Mechanical and ElectronicLtd's earnings are down 3.6% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Zhejiang Zhaofeng Mechanical and ElectronicLtd's dividend payments per share have declined at 1.0% per year on average over the past six years, which is uninspiring.

The Bottom Line

Has Zhejiang Zhaofeng Mechanical and ElectronicLtd got what it takes to maintain its dividend payments? Zhejiang Zhaofeng Mechanical and ElectronicLtd has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, while it has some positive characteristics, we're not inclined to race out and buy Zhejiang Zhaofeng Mechanical and ElectronicLtd today.

While it's tempting to invest in Zhejiang Zhaofeng Mechanical and ElectronicLtd for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Zhejiang Zhaofeng Mechanical and ElectronicLtd (1 is concerning!) that deserve your attention before investing in the shares.

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.