Zhejiang Yonggui Electric Equipment Co., Ltd. (SZSE:300351) Passed Our Checks, And It's About To Pay A CN¥0.10 Dividend

It looks like Zhejiang Yonggui Electric Equipment Co., Ltd. (SZSE:300351) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Zhejiang Yonggui Electric Equipment's shares before the 28th of May to receive the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be CN¥0.10 per share, on the back of last year when the company paid a total of CN¥0.10 to shareholders. Calculating the last year's worth of payments shows that Zhejiang Yonggui Electric Equipment has a trailing yield of 0.6% on the current share price of CN¥17.77. 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! As a result, readers should always check whether Zhejiang Yonggui Electric Equipment has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Zhejiang Yonggui Electric Equipment

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. Fortunately Zhejiang Yonggui Electric Equipment's payout ratio is modest, at just 37% of profit. A useful secondary check can be to evaluate whether Zhejiang Yonggui Electric Equipment generated enough free cash flow to afford its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Zhejiang Yonggui Electric Equipment's earnings have been skyrocketing, up 63% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Zhejiang Yonggui Electric Equipment has delivered an average of 5.1% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Zhejiang Yonggui Electric Equipment is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid Zhejiang Yonggui Electric Equipment? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Zhejiang Yonggui Electric Equipment's dividend merits.

So while Zhejiang Yonggui Electric Equipment looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Zhejiang Yonggui Electric Equipment you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.