Zhejiang Chunhui Intelligent Control Co., Ltd. (SZSE:300943) Pays A CN¥0.12 Dividend In Just Three Days

Readers hoping to buy Zhejiang Chunhui Intelligent Control Co., Ltd. (SZSE:300943) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Accordingly, Zhejiang Chunhui Intelligent Control investors that purchase the stock on or after the 30th of May will not receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be CN¥0.12 per share. Last year, in total, the company distributed CN¥0.12 to shareholders. Calculating the last year's worth of payments shows that Zhejiang Chunhui Intelligent Control has a trailing yield of 1.0% on the current share price of CN¥11.82. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Zhejiang Chunhui Intelligent Control

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. Zhejiang Chunhui Intelligent Control paid out a comfortable 46% of its profit last year. 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. Over the last year it paid out 55% of its free cash flow as dividends, within the usual 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 how much of its profit Zhejiang Chunhui Intelligent Control paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Zhejiang Chunhui Intelligent Control's 12% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last three years, Zhejiang Chunhui Intelligent Control has lifted its dividend by approximately 22% a year on average.

Final Takeaway

Is Zhejiang Chunhui Intelligent Control worth buying for its dividend? Earnings per share have fallen significantly, although at least Zhejiang Chunhui Intelligent Control paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So if you want to do more digging on Zhejiang Chunhui Intelligent Control, you'll find it worthwhile knowing the risks that this stock faces. To help with this, we've discovered 3 warning signs for Zhejiang Chunhui Intelligent Control that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.