Hunan Valin Wire & Cable Co.,Ltd. (SZSE:001208) Will Pay A CN¥0.05 Dividend In Three Days

Hunan Valin Wire & Cable Co.,Ltd. (SZSE:001208) stock is about to trade ex-dividend in three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. This means that investors who purchase Hunan Valin Wire & CableLtd'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¥0.05 a share, following on from the last 12 months, when the company distributed a total of CN¥0.05 per share to shareholders. Looking at the last 12 months of distributions, Hunan Valin Wire & CableLtd has a trailing yield of approximately 0.7% on its current stock price of CN¥7.22. 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! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Hunan Valin Wire & CableLtd

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. Hunan Valin Wire & CableLtd paid out a comfortable 31% of its profit last year. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 20% of its cash flow last year.

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 Hunan Valin Wire & CableLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Hunan Valin Wire & CableLtd's earnings are down 2.1% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hunan Valin Wire & CableLtd has seen its dividend decline 37% per annum on average over the past three years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Should investors buy Hunan Valin Wire & CableLtd for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Hunan Valin Wire & CableLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Hunan Valin Wire & CableLtd for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Hunan Valin Wire & CableLtd and understanding them should be part of your investment process.

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.