Be Sure To Check Out Xiamen R&T Plumbing Technology Co.,Ltd. (SZSE:002790) Before It Goes Ex-Dividend

Readers hoping to buy Xiamen R&T Plumbing Technology Co.,Ltd. (SZSE:002790) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Therefore, if you purchase Xiamen R&T Plumbing TechnologyLtd's shares on or after the 18th of June, you won't be eligible to receive the dividend, when it is paid on the 18th of June.

The company's next dividend payment will be CN¥0.25 per share, and in the last 12 months, the company paid a total of CN¥0.25 per share. Based on the last year's worth of payments, Xiamen R&T Plumbing TechnologyLtd stock has a trailing yield of around 2.4% on the current share price of CN¥10.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Xiamen R&T Plumbing TechnologyLtd

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. Xiamen R&T Plumbing TechnologyLtd paid out a comfortable 43% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 28% of its free cash flow in the past 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Xiamen R&T Plumbing TechnologyLtd earnings per share are up 7.8% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last eight years, Xiamen R&T Plumbing TechnologyLtd has lifted its dividend by approximately 9.9% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Xiamen R&T Plumbing TechnologyLtd worth buying for its dividend? Earnings per share growth has been growing somewhat, and Xiamen R&T Plumbing TechnologyLtd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Xiamen R&T Plumbing TechnologyLtd is halfway there. There's a lot to like about Xiamen R&T Plumbing TechnologyLtd, and we would prioritise taking a closer look at it.

So while Xiamen R&T Plumbing TechnologyLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Xiamen R&T Plumbing TechnologyLtd has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.