Baoxiniao Holding Co., Ltd. (SZSE:002154) Looks Interesting, And It's About To Pay A Dividend

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 Baoxiniao Holding Co., Ltd. (SZSE:002154) is about to go ex-dividend in just two 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Baoxiniao Holding's shares on or after the 16th of May, you won't be eligible to receive the dividend, when it is paid on the 16th of May.

The company's next dividend payment will be CN¥0.25 per share. Last year, in total, the company distributed CN¥0.25 to shareholders. Calculating the last year's worth of payments shows that Baoxiniao Holding has a trailing yield of 4.3% on the current share price of CN¥5.83. If you buy this business for its dividend, you should have an idea of whether Baoxiniao Holding's dividend is reliable and sustainable. As a result, readers should always check whether Baoxiniao Holding has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Baoxiniao Holding

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. Baoxiniao Holding is paying out an acceptable 53% of its profit, a common payout level among most companies. 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 46% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Baoxiniao Holding'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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Baoxiniao Holding's earnings have been skyrocketing, up 64% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Baoxiniao Holding has lifted its dividend by approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Baoxiniao Holding an attractive dividend stock, or better left on the shelf? We like Baoxiniao Holding's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Baoxiniao Holding looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Baoxiniao Holding for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Baoxiniao Holding that we recommend you consider before investing in the business.

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.