ShanDongDenghai Seeds Co.,Ltd (SZSE:002041) Passed Our Checks, And It's About To Pay A CN¥0.036 Dividend

ShanDongDenghai Seeds Co.,Ltd (SZSE:002041) is about to trade ex-dividend in the next 4 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase ShanDongDenghai SeedsLtd's shares before the 29th of May in order to be eligible for the dividend, which will be paid on the 29th of May.

The company's next dividend payment will be CN¥0.036 per share. Last year, in total, the company distributed CN¥0.036 to shareholders. Last year's total dividend payments show that ShanDongDenghai SeedsLtd has a trailing yield of 0.4% on the current share price of CN¥9.68. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for ShanDongDenghai SeedsLtd

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. ShanDongDenghai SeedsLtd has a low and conservative payout ratio of just 13% of its income after tax. 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. The good news is it paid out just 0.1% 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 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see ShanDongDenghai SeedsLtd's earnings have been skyrocketing, up 49% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, ShanDongDenghai SeedsLtd looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. ShanDongDenghai SeedsLtd's dividend payments per share have declined at 1.0% per year on average over the past 10 years, which is uninspiring.

To Sum It Up

Should investors buy ShanDongDenghai SeedsLtd for the upcoming dividend? It's great that ShanDongDenghai SeedsLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks ShanDongDenghai SeedsLtd is facing. Our analysis shows 1 warning sign for ShanDongDenghai SeedsLtd and you should be aware of it before buying any shares.

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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.