It Might Not Be A Great Idea To Buy Dian Diagnostics Group Co.,Ltd. (SZSE:300244) For Its Next Dividend

Dian Diagnostics Group Co.,Ltd. (SZSE:300244) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Dian Diagnostics GroupLtd's shares on or after the 20th of September, you won't be eligible to receive the dividend, when it is paid on the 20th of September.

The company's upcoming dividend is CN¥0.65 a share, following on from the last 12 months, when the company distributed a total of CN¥0.06 per share to shareholders. Based on the last year's worth of payments, Dian Diagnostics GroupLtd stock has a trailing yield of around 0.6% on the current share price of CN¥9.73. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Dian Diagnostics GroupLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Dian Diagnostics GroupLtd reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. What's good is that dividends were well covered by free cash flow, with the company paying out 18% of its cash flow last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Dian Diagnostics GroupLtd reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Dian Diagnostics GroupLtd has increased its dividend at approximately 1.8% a year on average.

We update our analysis on Dian Diagnostics GroupLtd every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

From a dividend perspective, should investors buy or avoid Dian Diagnostics GroupLtd? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Ever wonder what the future holds for Dian Diagnostics GroupLtd? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.