Why You Might Be Interested In Guizhou Space Appliance Co., LTD (SZSE:002025) 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 Guizhou Space Appliance Co., LTD (SZSE:002025) is about to go ex-dividend in just 3 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Guizhou Space Appliance's shares before the 14th of June in order to receive the dividend, which the company will pay on the 14th of June.

The company's next dividend payment will be CN¥0.38 per share. Last year, in total, the company distributed CN¥0.38 to shareholders. Looking at the last 12 months of distributions, Guizhou Space Appliance has a trailing yield of approximately 0.8% on its current stock price of CN¥48.46. 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 Guizhou Space Appliance has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Guizhou Space Appliance

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Guizhou Space Appliance paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Guizhou Space Appliance generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 18% 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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Guizhou Space Appliance's earnings per share have risen 15% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Guizhou Space Appliance has lifted its dividend by approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid Guizhou Space Appliance? It's great that Guizhou Space Appliance is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Guizhou Space Appliance looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Guizhou Space Appliance for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Guizhou Space Appliance and you should be aware of this before buying any 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.