Sichuan Injet Electric Co., Ltd. (SZSE:300820) Passed Our Checks, And It's About To Pay A CN¥0.40 Dividend

Sichuan Injet Electric Co., Ltd. (SZSE:300820) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Sichuan Injet Electric's shares before the 30th of May in order to be eligible for the dividend, which will be paid on the 30th of May.

The company's upcoming dividend is CN¥0.40 a share, following on from the last 12 months, when the company distributed a total of CN¥0.40 per share to shareholders. Based on the last year's worth of payments, Sichuan Injet Electric stock has a trailing yield of around 0.9% on the current share price of CN¥43.20. If you buy this business for its dividend, you should have an idea of whether Sichuan Injet Electric's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Sichuan Injet Electric

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sichuan Injet Electric paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. It paid out more than half (73%) of its free cash flow in the past year, which is within an average range for most companies.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 encouraging to see Sichuan Injet Electric has grown its earnings rapidly, up 24% a year 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. Sichuan Injet Electric has delivered 28% dividend growth per year on average over the past four years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

From a dividend perspective, should investors buy or avoid Sichuan Injet Electric? Earnings per share have grown at a nice rate in recent times and over the last year, Sichuan Injet Electric paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Sichuan Injet Electric, and we would prioritise taking a closer look at it.

While it's tempting to invest in Sichuan Injet Electric for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Sichuan Injet Electric that we strongly recommend you have a look at before investing in the company.

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.