Xgimi Technology Co.,Ltd. (SHSE:688696) Stock Goes Ex-Dividend In Just Two Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Xgimi Technology Co.,Ltd. (SHSE:688696) is about to go ex-dividend in just 2 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Xgimi TechnologyLtd's shares on or after the 4th of July will not receive the dividend, which will be paid on the 4th of July.

The company's next dividend payment will be CN¥0.30 per share, on the back of last year when the company paid a total of CN¥0.30 to shareholders. Last year's total dividend payments show that Xgimi TechnologyLtd has a trailing yield of 0.4% on the current share price of CN¥78.40. 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 Xgimi TechnologyLtd has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Xgimi TechnologyLtd

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. That's why it's good to see Xgimi TechnologyLtd paying out a modest 26% of its earnings. A useful secondary check can be to evaluate whether Xgimi TechnologyLtd generated enough free cash flow to afford its dividend. It distributed 40% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Xgimi TechnologyLtd'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Xgimi TechnologyLtd's earnings per share have fallen at approximately 18% a year over the previous 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. Xgimi TechnologyLtd's dividend payments per share have declined at 36% per year on average over the past three years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

From a dividend perspective, should investors buy or avoid Xgimi TechnologyLtd? Xgimi TechnologyLtd has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, Xgimi TechnologyLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Xgimi TechnologyLtd for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 3 warning signs for Xgimi TechnologyLtd you should be aware of.

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.

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