Only Three Days Left To Cash In On CareRay Digital Medical Technology's (SHSE:688607) Dividend

Readers hoping to buy CareRay Digital Medical Technology Co., Ltd. (SHSE:688607) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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, CareRay Digital Medical Technology investors that purchase the stock on or after the 17th of June will not receive the dividend, which will be paid on the 17th of June.

The company's next dividend payment will be CN¥0.054 per share, on the back of last year when the company paid a total of CN¥0.054 to shareholders. Last year's total dividend payments show that CareRay Digital Medical Technology has a trailing yield of 0.4% on the current share price of CN¥12.83. 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.

See our latest analysis for CareRay Digital Medical Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CareRay Digital Medical Technology paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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.

Click here to see how much of its profit CareRay Digital Medical Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see CareRay Digital Medical Technology's earnings per share have dropped 19% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CareRay Digital Medical Technology's dividend payments per share have declined at 46% per year on average over the past three years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Has CareRay Digital Medical Technology got what it takes to maintain its dividend payments? It's disappointing to see earnings per share declining, and this would ordinarily be enough to discourage us from most dividend stocks, even though CareRay Digital Medical Technology is paying out less than half its income as dividends. However, it's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. Bottom line: CareRay Digital Medical Technology has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that being said, if you're still considering CareRay Digital Medical Technology as an investment, you'll find it beneficial to know what risks this stock is facing. For example - CareRay Digital Medical Technology has 1 warning sign we think you should be aware of.

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.