Should You Buy Nanjing Quanxin Cable Technology Co., Ltd. (SZSE:300447) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Nanjing Quanxin Cable Technology Co., Ltd. (SZSE:300447) is about to trade ex-dividend in the next 4 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 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. This means that investors who purchase Nanjing Quanxin Cable Technology's shares on or after the 5th of June will not receive the dividend, which will be paid on the 5th of June.

The company's next dividend payment will be CN¥0.066 per share, and in the last 12 months, the company paid a total of CN¥0.066 per share. Looking at the last 12 months of distributions, Nanjing Quanxin Cable Technology has a trailing yield of approximately 0.4% on its current stock price of CN¥14.94. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Nanjing Quanxin Cable Technology

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. Nanjing Quanxin Cable Technology has a low and conservative payout ratio of just 20% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 5.0% of its free cash flow in the last year.

It's positive to see that Nanjing Quanxin Cable Technology'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 Nanjing Quanxin Cable Technology 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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Nanjing Quanxin Cable Technology's earnings have been skyrocketing, up 34% per annum for the past five years. Nanjing Quanxin Cable Technology earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Nanjing Quanxin Cable Technology has delivered an average of 5.2% per year annual increase in its dividend, based on the past eight years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Nanjing Quanxin Cable Technology is keeping back more of its profits to grow the business.

To Sum It Up

Is Nanjing Quanxin Cable Technology an attractive dividend stock, or better left on the shelf? It's great that Nanjing Quanxin Cable Technology 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. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Nanjing Quanxin Cable Technology has 2 warning signs we think you should be aware of.

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.