Just Four Days Till Shenzhen Mindray Bio-Medical Electronics Co., Ltd. (SZSE:300760) Will Be Trading Ex-Dividend

Readers hoping to buy Shenzhen Mindray Bio-Medical Electronics Co., Ltd. (SZSE:300760) 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. Therefore, if you purchase Shenzhen Mindray Bio-Medical Electronics' shares on or after the 28th of May, you won't be eligible to receive the dividend, when it is paid on the 28th of May.

The company's next dividend payment will be CN¥1.50 per share. Last year, in total, the company distributed CN¥5.80 to shareholders. Based on the last year's worth of payments, Shenzhen Mindray Bio-Medical Electronics stock has a trailing yield of around 1.9% on the current share price of CN¥310.00. If you buy this business for its dividend, you should have an idea of whether Shenzhen Mindray Bio-Medical Electronics's dividend is reliable and sustainable. So we need to investigate whether Shenzhen Mindray Bio-Medical Electronics can afford its dividend, and if the dividend could grow.

See our latest analysis for Shenzhen Mindray Bio-Medical Electronics

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. Shenzhen Mindray Bio-Medical Electronics paid out more than half (58%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Shenzhen Mindray Bio-Medical Electronics generated enough free cash flow to afford its dividend. It paid out 106% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Shenzhen Mindray Bio-Medical Electronics paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Shenzhen Mindray Bio-Medical Electronics's ability to maintain its dividend.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Shenzhen Mindray Bio-Medical Electronics has grown its earnings rapidly, up 25% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last five years, Shenzhen Mindray Bio-Medical Electronics has lifted its dividend by approximately 42% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is Shenzhen Mindray Bio-Medical Electronics an attractive dividend stock, or better left on the shelf? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 106% of its cashflow, which is uncomfortably high. To summarise, Shenzhen Mindray Bio-Medical Electronics looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into Shenzhen Mindray Bio-Medical Electronics, it's worth knowing the risks this business faces. Case in point: We've spotted 1 warning sign for Shenzhen Mindray Bio-Medical Electronics you should be aware of.

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.