There's A Lot To Like About Yuan Cheng CableLtd's (SZSE:002692) Upcoming CN¥0.02 Dividend

Yuan Cheng Cable Co.,Ltd. (SZSE:002692) stock is about to trade ex-dividend in two 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Yuan Cheng CableLtd's shares on or after the 19th of June will not receive the dividend, which will be paid on the 19th of June.

The company's next dividend payment will be CN¥0.02 per share. Last year, in total, the company distributed CN¥0.02 to shareholders. Based on the last year's worth of payments, Yuan Cheng CableLtd stock has a trailing yield of around 0.6% on the current share price of CN¥3.53. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Yuan Cheng CableLtd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Yuan Cheng CableLtd 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 Yuan Cheng CableLtd generated enough free cash flow to afford its dividend. Over the last year it paid out 74% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Yuan Cheng CableLtd'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 Yuan Cheng CableLtd 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Yuan Cheng CableLtd's earnings have been skyrocketing, up 67% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Yuan Cheng CableLtd's dividend payments per share have declined at 5.8% per year on average over the past 10 years, which is uninspiring. Yuan Cheng CableLtd is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Should investors buy Yuan Cheng CableLtd for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Yuan Cheng CableLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Yuan Cheng CableLtd has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Yuan Cheng CableLtd that we recommend you consider before investing in the business.

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.

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