Is It Worth Considering Fujian Septwolves Industry Co., Ltd. (SZSE:002029) For Its Upcoming Dividend?

It looks like Fujian Septwolves Industry Co., Ltd. (SZSE:002029) is about to go ex-dividend in the next three 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. 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. Accordingly, Fujian Septwolves Industry investors that purchase the stock on or after the 21st of June will not receive the dividend, which will be paid on the 21st of June.

The company's next dividend payment will be CN¥0.12 per share, on the back of last year when the company paid a total of CN¥0.12 to shareholders. Looking at the last 12 months of distributions, Fujian Septwolves Industry has a trailing yield of approximately 2.3% on its current stock price of CN¥5.23. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Fujian Septwolves Industry

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fujian Septwolves Industry paid out a comfortable 30% of its profit last year. A useful secondary check can be to evaluate whether Fujian Septwolves Industry generated enough free cash flow to afford its dividend. The good news is it paid out just 1.1% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Fujian Septwolves Industry paid out over the last 12 months.

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. That's why it's not ideal to see Fujian Septwolves Industry's earnings per share have been shrinking at 2.4% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Fujian Septwolves Industry has increased its dividend at approximately 1.8% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Fujian Septwolves Industry? Fujian Septwolves Industry 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, Fujian Septwolves Industry looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Fujian Septwolves Industry is facing. For example - Fujian Septwolves Industry has 2 warning signs we think you should be aware of.

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