Ningbo Sanxing Medical ElectricLtd (SHSE:601567) Could Be A Buy For Its Upcoming 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 Ningbo Sanxing Medical Electric Co.,Ltd. (SHSE:601567) is about to go ex-dividend in just two 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. This means that investors who purchase Ningbo Sanxing Medical ElectricLtd's shares on or after the 19th of June will not receive the dividend, which will be paid on the 19th of June.

The company's next dividend payment will be CN¥0.65 per share, and in the last 12 months, the company paid a total of CN¥0.65 per share. Last year's total dividend payments show that Ningbo Sanxing Medical ElectricLtd has a trailing yield of 1.9% on the current share price of CN¥33.69. If you buy this business for its dividend, you should have an idea of whether Ningbo Sanxing Medical ElectricLtd's dividend is reliable and sustainable. As a result, readers should always check whether Ningbo Sanxing Medical ElectricLtd has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Ningbo Sanxing Medical ElectricLtd

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 Ningbo Sanxing Medical ElectricLtd paying out a modest 46% 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. Over the last year it paid out 50% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. It's encouraging to see Ningbo Sanxing Medical ElectricLtd has grown its earnings rapidly, up 32% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Ningbo Sanxing Medical ElectricLtd has lifted its dividend by approximately 13% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy Ningbo Sanxing Medical ElectricLtd for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Ningbo Sanxing Medical ElectricLtd paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Ningbo Sanxing Medical ElectricLtd for the dividends alone, you should always be mindful of the risks involved. For example - Ningbo Sanxing Medical ElectricLtd has 1 warning sign we think 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.

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