Shaanxi Baoguang Vacuum Electric Device Co., Ltd. (SHSE:600379) Passed Our Checks, And It's About To Pay A CN¥0.065 Dividend

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 Shaanxi Baoguang Vacuum Electric Device Co., Ltd. (SHSE:600379) 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Shaanxi Baoguang Vacuum Electric Device investors that purchase the stock on or after the 5th of July will not receive the dividend, which will be paid on the 5th of July.

The company's upcoming dividend is CN¥0.065 a share, following on from the last 12 months, when the company distributed a total of CN¥0.065 per share to shareholders. Based on the last year's worth of payments, Shaanxi Baoguang Vacuum Electric Device stock has a trailing yield of around 0.8% on the current share price of CN¥8.34. If you buy this business for its dividend, you should have an idea of whether Shaanxi Baoguang Vacuum Electric Device's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Shaanxi Baoguang Vacuum Electric Device

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. Shaanxi Baoguang Vacuum Electric Device paid out a comfortable 28% of its profit last year. A useful secondary check can be to evaluate whether Shaanxi Baoguang Vacuum Electric Device generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.

It's positive to see that Shaanxi Baoguang Vacuum Electric Device'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 Shaanxi Baoguang Vacuum Electric Device 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Shaanxi Baoguang Vacuum Electric Device's earnings per share have been growing at 15% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Shaanxi Baoguang Vacuum Electric Device has lifted its dividend by approximately 14% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Shaanxi Baoguang Vacuum Electric Device worth buying for its dividend? Shaanxi Baoguang Vacuum Electric Device has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Shaanxi Baoguang Vacuum Electric Device, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 1 warning sign with Shaanxi Baoguang Vacuum Electric Device and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com