Anhui Anli Material Technology (SZSE:300218) Could Be A Buy For Its Upcoming Dividend

Anhui Anli Material Technology Co., Ltd. (SZSE:300218) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Anhui Anli Material Technology investors that purchase the stock on or after the 28th of May will not receive the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be CN¥0.13 per share, on the back of last year when the company paid a total of CN¥0.13 to shareholders. Based on the last year's worth of payments, Anhui Anli Material Technology has a trailing yield of 0.8% on the current stock price of CN¥15.95. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Anhui Anli Material Technology has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Anhui Anli Material Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Anhui Anli Material Technology is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 23% of its cash flow 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 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. It's encouraging to see Anhui Anli Material Technology has grown its earnings rapidly, up 41% a year for the past five years. Anhui Anli Material Technology looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Anhui Anli Material Technology has lifted its dividend by approximately 5.0% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Should investors buy Anhui Anli Material Technology for the upcoming dividend? Anhui Anli Material Technology has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Anhui Anli Material Technology is facing. Every company has risks, and we've spotted 1 warning sign for Anhui Anli Material Technology you should know about.

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.