Be Sure To Check Out GuangZhou Wahlap Technology Corporation Limited (SZSE:301011) Before It Goes Ex-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 GuangZhou Wahlap Technology Corporation Limited (SZSE:301011) is about to go ex-dividend in just 3 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. 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. This means that investors who purchase GuangZhou Wahlap Technology's shares on or after the 27th of June will not receive the dividend, which will be paid on the 27th of June.

The company's upcoming dividend is CN¥0.20 a share, following on from the last 12 months, when the company distributed a total of CN¥0.20 per share to shareholders. Calculating the last year's worth of payments shows that GuangZhou Wahlap Technology has a trailing yield of 1.4% on the current share price of CN¥14.81. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for GuangZhou Wahlap Technology

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately GuangZhou Wahlap Technology's payout ratio is modest, at just 45% of profit. 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. Luckily it paid out just 1.8% of its free 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 how much of its profit GuangZhou Wahlap Technology paid out over the last 12 months.

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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see GuangZhou Wahlap Technology earnings per share are up 9.2% 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. GuangZhou Wahlap Technology has delivered 30% dividend growth per year on average over the past two years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is GuangZhou Wahlap Technology an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and GuangZhou Wahlap 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 GuangZhou Wahlap Technology is being conservative with its dividend payouts and could still perform reasonably over the long run. GuangZhou Wahlap Technology looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while GuangZhou Wahlap Technology looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, GuangZhou Wahlap Technology has 2 warning signs (and 1 which doesn't sit too well with us) we think 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.

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