Four Days Left Until Xuchang KETOP Testing Research Institute Co.,Ltd (SZSE:003008) Trades Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Xuchang KETOP Testing Research Institute Co.,Ltd (SZSE:003008) is about to trade ex-dividend in the next four days. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Xuchang KETOP Testing Research InstituteLtd's shares before the 27th of May in order to receive the dividend, which the company will pay on the 27th of May.

The company's upcoming dividend is CN¥0.30 a share, following on from the last 12 months, when the company distributed a total of CN¥0.30 per share to shareholders. Calculating the last year's worth of payments shows that Xuchang KETOP Testing Research InstituteLtd has a trailing yield of 1.3% on the current share price of CN¥22.31. 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 Xuchang KETOP Testing Research InstituteLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Xuchang KETOP Testing Research InstituteLtd

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. Xuchang KETOP Testing Research InstituteLtd paid out a comfortable 43% of its profit last year. 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. Over the last year it paid out 72% 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 Xuchang KETOP Testing Research InstituteLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Xuchang KETOP Testing Research InstituteLtd's earnings per share have fallen at approximately 17% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Xuchang KETOP Testing Research InstituteLtd's dividend payments per share have declined at 21% per year on average over the past three years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

Is Xuchang KETOP Testing Research InstituteLtd an attractive dividend stock, or better left on the shelf? Earnings per share have fallen significantly, although at least Xuchang KETOP Testing Research InstituteLtd paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. All things considered, we are not particularly enthused about Xuchang KETOP Testing Research InstituteLtd from a dividend perspective.

So if you want to do more digging on Xuchang KETOP Testing Research InstituteLtd, you'll find it worthwhile knowing the risks that this stock faces. Be aware that Xuchang KETOP Testing Research InstituteLtd is showing 3 warning signs in our investment analysis, and 1 of those is a bit concerning...

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.