Interested In Guangdong Nedfon Air System's (SZSE:301043) Upcoming CN¥0.88 Dividend? You Have Four Days Left

Guangdong Nedfon Air System Co., Ltd. (SZSE:301043) stock is about to trade ex-dividend in four 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Guangdong Nedfon Air System's shares on or after the 29th of May, you won't be eligible to receive the dividend, when it is paid on the 29th of May.

The company's upcoming dividend is CN¥0.88 a share, following on from the last 12 months, when the company distributed a total of CN¥0.88 per share to shareholders. Looking at the last 12 months of distributions, Guangdong Nedfon Air System has a trailing yield of approximately 3.3% on its current stock price of CN¥26.85. 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.

View our latest analysis for Guangdong Nedfon Air System

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. Guangdong Nedfon Air System is paying out an acceptable 60% of its profit, a common payout level among 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. Over the last year, it paid out more than three-quarters (80%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Guangdong Nedfon Air System's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Guangdong Nedfon Air System paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Guangdong Nedfon Air System, with earnings per share up 7.9% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Guangdong Nedfon Air System has delivered 232% dividend growth per year on average over the past two years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Guangdong Nedfon Air System an attractive dividend stock, or better left on the shelf? Earnings per share have been growing modestly and Guangdong Nedfon Air System paid out a bit over half of its earnings and free cash flow last year. All things considered, we are not particularly enthused about Guangdong Nedfon Air System from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Guangdong Nedfon Air System, you should know about the other risks facing this business. To help with this, we've discovered 1 warning sign for Guangdong Nedfon Air System 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.

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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.