Shanghai National Center of Testing and Inspection for Electric Cable and Wire Co., Ltd. (SZSE:301289) Passed Our Checks, And It's About To Pay A CN¥0.40 Dividend

Shanghai National Center of Testing and Inspection for Electric Cable and Wire Co., Ltd. (SZSE:301289) is about to trade ex-dividend in the next 2 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Shanghai National Center of Testing and Inspection for Electric Cable and Wire's shares on or after the 26th of June, you won't be eligible to receive the dividend, when it is paid on the 26th of June.

The company's upcoming dividend is CN¥0.40 a share, following on from the last 12 months, when the company distributed a total of CN¥0.40 per share to shareholders. Looking at the last 12 months of distributions, Shanghai National Center of Testing and Inspection for Electric Cable and Wire has a trailing yield of approximately 1.0% on its current stock price of CN¥40.06. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Shanghai National Center of Testing and Inspection for Electric Cable and Wire

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Shanghai National Center of Testing and Inspection for Electric Cable and Wire paying out a modest 40% of its 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 distributed 45% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Shanghai National Center of Testing and Inspection for Electric Cable and Wire'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 Shanghai National Center of Testing and Inspection for Electric Cable and Wire paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Shanghai National Center of Testing and Inspection for Electric Cable and Wire's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Given that Shanghai National Center of Testing and Inspection for Electric Cable and Wire has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

Is Shanghai National Center of Testing and Inspection for Electric Cable and Wire an attractive dividend stock, or better left on the shelf? Earnings per share have been flat over this time, but we're intrigued to see that Shanghai National Center of Testing and Inspection for Electric Cable and Wire is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Shanghai National Center of Testing and Inspection for Electric Cable and Wire is halfway there. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Shanghai National Center of Testing and Inspection for Electric Cable and Wire is facing. To help with this, we've discovered 1 warning sign for Shanghai National Center of Testing and Inspection for Electric Cable and Wire 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.

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