Read This Before Considering Xiamen Guang Pu Electronics Co., Ltd. (SZSE:300632) For Its Upcoming CN¥0.203165 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Xiamen Guang Pu Electronics Co., Ltd. (SZSE:300632) is about to go ex-dividend in just two 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 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. Meaning, you will need to purchase Xiamen Guang Pu Electronics' shares before the 30th of May to receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be CN¥0.203165 per share, and in the last 12 months, the company paid a total of CN¥0.20 per share. Based on the last year's worth of payments, Xiamen Guang Pu Electronics has a trailing yield of 2.0% on the current stock price of CN¥10.21. 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 Xiamen Guang Pu Electronics

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. Xiamen Guang Pu Electronics paid out more than half (74%) of its earnings last year, which is a regular payout ratio for 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. Fortunately, it paid out only 33% 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 how much of its profit Xiamen Guang Pu Electronics paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Xiamen Guang Pu Electronics's 11% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Xiamen Guang Pu Electronics has delivered 31% dividend growth per year on average over the past six years. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

To Sum It Up

Has Xiamen Guang Pu Electronics got what it takes to maintain its dividend payments? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Xiamen Guang Pu Electronics's dividend merits.

If you want to look further into Xiamen Guang Pu Electronics, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 3 warning signs for Xiamen Guang Pu Electronics (of which 1 doesn't sit too well with us!) you should know about.

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.