Interested In Xinya Electronic's (SHSE:605277) Upcoming CN¥0.20 Dividend? You Have Three Days Left

Xinya Electronic Co., Ltd. (SHSE:605277) is about to trade 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. This means that investors who purchase Xinya Electronic's shares on or after the 13th of June will not receive the dividend, which will be paid on the 13th of June.

The company's upcoming dividend is CN¥0.20 a share, following on from the last 12 months, when the company distributed a total of CN¥0.20 per share to shareholders. Based on the last year's worth of payments, Xinya Electronic stock has a trailing yield of around 1.3% on the current share price of CN¥15.17. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Xinya Electronic has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Xinya Electronic

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Xinya Electronic's payout ratio is modest, at just 34% of profit. A useful secondary check can be to evaluate whether Xinya Electronic generated enough free cash flow to afford its dividend. It paid out more than half (69%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Xinya Electronic'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 Xinya Electronic paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Xinya Electronic's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Xinya Electronic has delivered 8.3% dividend growth per year on average over the past three years.

To Sum It Up

Is Xinya Electronic worth buying for its dividend? Earnings per share have been flat over the three-year timeframe we consider, and Xinya Electronic paid out less than half its earnings and more than half its free cashflow over the last year. In summary, it's hard to get excited about Xinya Electronic from a dividend perspective.

So while Xinya Electronic looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 4 warning signs for Xinya Electronic (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.