Just Two Days Till Tecnon Electronics Co., Ltd. (SZSE:300650) Will Be Trading Ex-Dividend

Tecnon Electronics Co., Ltd. (SZSE:300650) is about to trade ex-dividend in the next 2 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Tecnon Electronics investors that purchase the stock on or after the 29th of May will not receive the dividend, which will be paid on the 29th of May.

The company's next dividend payment will be CN¥0.04 per share. Last year, in total, the company distributed CN¥0.04 to shareholders. Last year's total dividend payments show that Tecnon Electronics has a trailing yield of 0.4% on the current share price of CN¥9.37. If you buy this business for its dividend, you should have an idea of whether Tecnon Electronics's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Tecnon Electronics

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. Tecnon Electronics has a low and conservative payout ratio of just 18% of its income after tax. 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 6.8% of its free cash flow as dividends last year, which is conservatively low.

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 Tecnon 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Tecnon Electronics's earnings per share have fallen at approximately 7.9% a year over the previous 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. Tecnon Electronics's dividend payments per share have declined at 12% per year on average over the past six years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Is Tecnon Electronics an attractive dividend stock, or better left on the shelf? Tecnon Electronics has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

So while Tecnon Electronics looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Tecnon Electronics has 2 warning signs (and 1 which can't be ignored) we think 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.