Only One Day Left To Cash In On Xi'an High Voltage Apparatus Research Institute's (SHSE:688334) Dividend

Xi'an High Voltage Apparatus Research Institute Co., Ltd. (SHSE:688334) stock is about to trade ex-dividend in day or two. 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. Thus, you can purchase Xi'an High Voltage Apparatus Research Institute's shares before the 15th of January in order to receive the dividend, which the company will pay on the 15th of January.

The company's next dividend payment will be CN¥0.10 per share, and in the last 12 months, the company paid a total of CN¥0.32 per share. Looking at the last 12 months of distributions, Xi'an High Voltage Apparatus Research Institute has a trailing yield of approximately 2.0% on its current stock price of CN¥15.79. 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 investigate whether Xi'an High Voltage Apparatus Research Institute can afford its dividend, and if the dividend could grow.

See our latest analysis for Xi'an High Voltage Apparatus Research Institute

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Xi'an High Voltage Apparatus Research Institute paid out 74% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 33% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Xi'an High Voltage Apparatus Research Institute'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 Xi'an High Voltage Apparatus Research Institute paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Xi'an High Voltage Apparatus Research Institute's 26% per annum decline in earnings in the past three years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Given that Xi'an High Voltage Apparatus Research Institute has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Has Xi'an High Voltage Apparatus Research Institute got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. 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.

However if you're still interested in Xi'an High Voltage Apparatus Research Institute as a potential investment, you should definitely consider some of the risks involved with Xi'an High Voltage Apparatus Research Institute. To help with this, we've discovered 1 warning sign for Xi'an High Voltage Apparatus Research Institute that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.