Guangzhou Haoyang Electronic Co.,Ltd. (SZSE:300833) Stock Goes Ex-Dividend In Just Four Days

Readers hoping to buy Guangzhou Haoyang Electronic Co.,Ltd. (SZSE:300833) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Meaning, you will need to purchase Guangzhou Haoyang ElectronicLtd's shares before the 11th of June to receive the dividend, which will be paid on the 11th of June.

The company's next dividend payment will be CN¥2.40 per share, on the back of last year when the company paid a total of CN¥2.40 to shareholders. Looking at the last 12 months of distributions, Guangzhou Haoyang ElectronicLtd has a trailing yield of approximately 3.0% on its current stock price of CN¥79.67. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Guangzhou Haoyang ElectronicLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Guangzhou Haoyang ElectronicLtd

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. Guangzhou Haoyang ElectronicLtd paid out more than half (55%) 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. Guangzhou Haoyang ElectronicLtd paid out more free cash flow than it generated - 132%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Guangzhou Haoyang ElectronicLtd does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Guangzhou Haoyang ElectronicLtd paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Guangzhou Haoyang ElectronicLtd to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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. For this reason, we're glad to see Guangzhou Haoyang ElectronicLtd's earnings per share have risen 19% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Guangzhou Haoyang ElectronicLtd has delivered an average of 82% per year annual increase in its dividend, based on the past three years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Guangzhou Haoyang ElectronicLtd an attractive dividend stock, or better left on the shelf? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Guangzhou Haoyang ElectronicLtd paid out a much higher percentage of its free cash flow, which makes us uncomfortable. In summary, it's hard to get excited about Guangzhou Haoyang ElectronicLtd from a dividend perspective.

So if you want to do more digging on Guangzhou Haoyang ElectronicLtd, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 2 warning signs for Guangzhou Haoyang ElectronicLtd that we strongly recommend you have a look at before investing in the company.

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.