Wuxi New Hongtai Electrical Technology Co.,Ltd (SHSE:603016) Stock Goes Ex-Dividend In Just Three Days

It looks like Wuxi New Hongtai Electrical Technology Co.,Ltd (SHSE:603016) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Meaning, you will need to purchase Wuxi New Hongtai Electrical TechnologyLtd's shares before the 7th of June to receive the dividend, which will be paid on the 7th of June.

The company's next dividend payment will be CN¥0.372 per share, and in the last 12 months, the company paid a total of CN¥0.31 per share. Calculating the last year's worth of payments shows that Wuxi New Hongtai Electrical TechnologyLtd has a trailing yield of 1.8% on the current share price of CN¥17.43. 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 investigate whether Wuxi New Hongtai Electrical TechnologyLtd can afford its dividend, and if the dividend could grow.

See our latest analysis for Wuxi New Hongtai Electrical TechnologyLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wuxi New Hongtai Electrical TechnologyLtd is paying out an acceptable 67% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 49% of the free cash flow it generated, which is a comfortable payout ratio.

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 how much of its profit Wuxi New Hongtai Electrical 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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Wuxi New Hongtai Electrical TechnologyLtd earnings per share are up 2.5% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wuxi New Hongtai Electrical TechnologyLtd's dividend payments per share have declined at 1.3% per year on average over the past seven years, which is uninspiring.

To Sum It Up

Should investors buy Wuxi New Hongtai Electrical TechnologyLtd for the upcoming dividend? While earnings per share growth has been modest, Wuxi New Hongtai Electrical TechnologyLtd's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. In summary, it's hard to get excited about Wuxi New Hongtai Electrical TechnologyLtd from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Wuxi New Hongtai Electrical TechnologyLtd 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.