Read This Before Considering Allgens Medical Technology CO., LTD. (SHSE:688613) For Its Upcoming CN¥0.06001 Dividend

Allgens Medical Technology CO., LTD. (SHSE:688613) stock is about to trade ex-dividend in 3 days. 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. 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. Thus, you can purchase Allgens Medical Technology's shares before the 9th of July in order to receive the dividend, which the company will pay on the 9th of July.

The company's next dividend payment will be CN¥0.06001 per share. Last year, in total, the company distributed CN¥0.061 to shareholders. Based on the last year's worth of payments, Allgens Medical Technology has a trailing yield of 0.5% on the current stock price of CN¥12.00. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Allgens Medical 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. Allgens Medical Technology paid out just 19% 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. It paid out more than half (65%) of its free cash flow in the past year, which is within an average range for most companies.

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 Allgens Medical Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Allgens Medical Technology's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Allgens Medical Technology's dividend payments per share have declined at 53% per year on average over the past two years, which is uninspiring.

The Bottom Line

Is Allgens Medical Technology worth buying for its dividend? Its earnings per share are effectively flat in recent times. The company paid out less than half its income and more than half its cash flow as dividends to shareholders. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Allgens Medical Technology's dividend merits.

With that being said, if dividends aren't your biggest concern with Allgens Medical Technology, you should know about the other risks facing this business. To help with this, we've discovered 3 warning signs for Allgens Medical Technology (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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