Xiamen R&T Plumbing Technology Co.,Ltd. (SZSE:002790) Will Pay A CN¥0.04 Dividend In Two Days

It looks like Xiamen R&T Plumbing Technology Co.,Ltd. (SZSE:002790) is about to go ex-dividend in the next two days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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 Xiamen R&T Plumbing TechnologyLtd's shares before the 19th of December in order to receive the dividend, which the company will pay on the 19th of December.

The company's next dividend payment will be CN¥0.04 per share, on the back of last year when the company paid a total of CN¥0.25 to shareholders. Last year's total dividend payments show that Xiamen R&T Plumbing TechnologyLtd has a trailing yield of 2.9% on the current share price of CN¥8.52. 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.

Check out 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 is paying out an acceptable 61% of its profit, a common payout level among most companies. 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. It paid out 79% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Xiamen R&T Plumbing TechnologyLtd's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. A payout ratio of 61% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, nine years ago, Xiamen R&T Plumbing TechnologyLtd has lifted its dividend by approximately 8.8% a year on average.

Final Takeaway

Is Xiamen R&T Plumbing TechnologyLtd worth buying for its dividend? Earnings per share have barely grown, and although Xiamen R&T Plumbing TechnologyLtd paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. In summary, while it has some positive characteristics, we're not inclined to race out and buy Xiamen R&T Plumbing TechnologyLtd today.

So if you want to do more digging on Xiamen R&T Plumbing TechnologyLtd, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 2 warning signs for Xiamen R&T Plumbing TechnologyLtd and you should be aware of them 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.