Shandong Yuma Sun-shading Technology (SZSE:300993) Could Be A Buy For Its Upcoming Dividend

It looks like Shandong Yuma Sun-shading Technology Corp., Ltd. (SZSE:300993) is about to go ex-dividend in the next couple of days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase Shandong Yuma Sun-shading Technology's shares on or after the 18th of June, you won't be eligible to receive the dividend, when it is paid on the 18th of June.

The company's upcoming dividend is CN¥0.18 a share, following on from the last 12 months, when the company distributed a total of CN¥0.18 per share to shareholders. Based on the last year's worth of payments, Shandong Yuma Sun-shading Technology has a trailing yield of 1.9% on the current stock price of CN¥9.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Shandong Yuma Sun-shading Technology can afford its dividend, and if the dividend could grow.

View our latest analysis for Shandong Yuma Sun-shading Technology

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. Shandong Yuma Sun-shading Technology paid out a comfortable 31% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 46% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Shandong Yuma Sun-shading Technology'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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Shandong Yuma Sun-shading Technology earnings per share are up 7.6% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past two years, Shandong Yuma Sun-shading Technology has increased its dividend at approximately 45% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Shandong Yuma Sun-shading Technology an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Shandong Yuma Sun-shading Technology is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Shandong Yuma Sun-shading Technology is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Shandong Yuma Sun-shading Technology, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Shandong Yuma Sun-shading Technology is facing. Case in point: We've spotted 1 warning sign for Shandong Yuma Sun-shading Technology you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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

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