Zhejiang Biyi Electric Appliance Co., Ltd. (SHSE:603215) Will Pay A CN¥0.375 Dividend In Three Days

Zhejiang Biyi Electric Appliance Co., Ltd. (SHSE:603215) stock is about to trade ex-dividend in 3 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. Thus, you can purchase Zhejiang Biyi Electric Appliance's shares before the 4th of June in order to receive the dividend, which the company will pay on the 4th of June.

The company's upcoming dividend is CN¥0.375 a share, following on from the last 12 months, when the company distributed a total of CN¥0.37 per share to shareholders. Based on the last year's worth of payments, Zhejiang Biyi Electric Appliance stock has a trailing yield of around 2.5% on the current share price of CN¥14.78. If you buy this business for its dividend, you should have an idea of whether Zhejiang Biyi Electric Appliance's dividend is reliable and sustainable. So we need to investigate whether Zhejiang Biyi Electric Appliance can afford its dividend, and if the dividend could grow.

View our latest analysis for Zhejiang Biyi Electric Appliance

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. Fortunately Zhejiang Biyi Electric Appliance's payout ratio is modest, at just 43% of profit. 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. It paid out an unsustainably high 333% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Zhejiang Biyi Electric Appliance intends to continue funding this dividend, or if it could be forced to cut the payment.

Zhejiang Biyi Electric Appliance 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.

Zhejiang Biyi Electric Appliance paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Zhejiang Biyi Electric Appliance's ability to maintain its dividend.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Zhejiang Biyi Electric Appliance earnings per share are up 4.9% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, two years ago, Zhejiang Biyi Electric Appliance has lifted its dividend by approximately 18% a year on average. 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.

Final Takeaway

Should investors buy Zhejiang Biyi Electric Appliance for the upcoming dividend? Zhejiang Biyi Electric Appliance delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 333% of its cash flow over the last year, which is a mediocre outcome. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Zhejiang Biyi Electric Appliance's dividend merits.

However if you're still interested in Zhejiang Biyi Electric Appliance as a potential investment, you should definitely consider some of the risks involved with Zhejiang Biyi Electric Appliance. For example, we've found 2 warning signs for Zhejiang Biyi Electric Appliance (1 shouldn't be ignored!) 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.