Is It Worth Considering Suzhou Electrical Apparatus Science Academy Co., Ltd. (SZSE:300215) For Its Upcoming Dividend?

It looks like Suzhou Electrical Apparatus Science Academy Co., Ltd. (SZSE:300215) is about to go ex-dividend in the next three 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. Meaning, you will need to purchase Suzhou Electrical Apparatus Science Academy's shares before the 9th of July to receive the dividend, which will be paid on the 9th of July.

The company's next dividend payment will be CN¥0.035 per share. Last year, in total, the company distributed CN¥0.035 to shareholders. Based on the last year's worth of payments, Suzhou Electrical Apparatus Science Academy stock has a trailing yield of around 0.7% on the current share price of CN¥5.13. If you buy this business for its dividend, you should have an idea of whether Suzhou Electrical Apparatus Science Academy's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Suzhou Electrical Apparatus Science Academy

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. Its dividend payout ratio is 83% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. 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. It paid out 5.8% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Suzhou Electrical Apparatus Science Academy'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 Suzhou Electrical Apparatus Science Academy 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Suzhou Electrical Apparatus Science Academy's earnings per share have dropped 24% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Suzhou Electrical Apparatus Science Academy's dividend payments per share have declined at 7.3% per year on average over the past 10 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

From a dividend perspective, should investors buy or avoid Suzhou Electrical Apparatus Science Academy? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. Overall, it's hard to get excited about Suzhou Electrical Apparatus Science Academy from a dividend perspective.

However if you're still interested in Suzhou Electrical Apparatus Science Academy as a potential investment, you should definitely consider some of the risks involved with Suzhou Electrical Apparatus Science Academy. For example, we've found 3 warning signs for Suzhou Electrical Apparatus Science Academy (2 are concerning!) that deserve your attention before investing in the 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.

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