Shenzhen Desay Battery Technology Co., Ltd. (SZSE:000049) Will Pay A CN¥0.45 Dividend In Three Days

Shenzhen Desay Battery Technology Co., Ltd. (SZSE:000049) is about to trade ex-dividend in the next 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Shenzhen Desay Battery Technology's shares on or after the 9th of May, you won't be eligible to receive the dividend, when it is paid on the 9th of May.

The company's next dividend payment will be CN¥0.45 per share, and in the last 12 months, the company paid a total of CN¥0.45 per share. Based on the last year's worth of payments, Shenzhen Desay Battery Technology stock has a trailing yield of around 2.1% on the current share price of CN¥21.89. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Shenzhen Desay Battery Technology has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Shenzhen Desay Battery Technology

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. Shenzhen Desay Battery Technology paid out a comfortable 29% of its profit last year. 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. Over the last year, it paid out more than three-quarters (81%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Shenzhen Desay Battery Technology'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Shenzhen Desay Battery Technology's flat earnings 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. A high payout ratio of 29% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Shenzhen Desay Battery Technology could be signalling that its future growth prospects are thin.

Shenzhen Desay Battery Technology also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Shenzhen Desay Battery Technology has increased its dividend at approximately 5.0% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Shenzhen Desay Battery Technology? Shenzhen Desay Battery Technology has struggled to grow earnings per share, and it's paying out less than half of its earnings and more than half its cash flow to shareholders as dividends. In summary, while it has some positive characteristics, we're not inclined to race out and buy Shenzhen Desay Battery Technology today.

In light of that, while Shenzhen Desay Battery Technology has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for Shenzhen Desay Battery Technology you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.