Hisense Visual Technology Co., Ltd. (SHSE:600060) Pays A CN¥0.8053 Dividend In Just Four Days

It looks like Hisense Visual Technology Co., Ltd. (SHSE:600060) is about to go ex-dividend in the next 4 days. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Hisense Visual Technology investors that purchase the stock on or after the 31st of July will not receive the dividend, which will be paid on the 31st of July.

The company's next dividend payment will be CN¥0.8053 per share, and in the last 12 months, the company paid a total of CN¥0.81 per share. Last year's total dividend payments show that Hisense Visual Technology has a trailing yield of 4.1% on the current share price of CN¥19.51. If you buy this business for its dividend, you should have an idea of whether Hisense Visual Technology's dividend is reliable and sustainable. As a result, readers should always check whether Hisense Visual Technology has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Hisense Visual Technology

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. Hisense Visual Technology paid out 54% of its earnings to investors last year, a normal payout level for most businesses. 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. The company paid out 106% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Hisense Visual Technology does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

While Hisense Visual Technology's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Hisense Visual Technology to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Hisense Visual Technology's earnings have been skyrocketing, up 38% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hisense Visual Technology has delivered 8.2% dividend growth per year on average over the past 10 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

From a dividend perspective, should investors buy or avoid Hisense Visual Technology? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Hisense Visual Technology paid out a much higher percentage of its free cash flow, which makes us uncomfortable. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

With that being said, if dividends aren't your biggest concern with Hisense Visual Technology, you should know about the other risks facing this business. To help with this, we've discovered 1 warning sign for Hisense Visual Technology that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.

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