Shenzhen New Industries Biomedical Engineering Co., Ltd. (SZSE:300832) Passed Our Checks, And It's About To Pay A CN¥1.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shenzhen New Industries Biomedical Engineering Co., Ltd. (SZSE:300832) is about to trade ex-dividend in the next 2 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. Meaning, you will need to purchase Shenzhen New Industries Biomedical Engineering's shares before the 15th of May to receive the dividend, which will be paid on the 15th of May.

The company's next dividend payment will be CN¥1.00 per share. Last year, in total, the company distributed CN¥1.00 to shareholders. Last year's total dividend payments show that Shenzhen New Industries Biomedical Engineering has a trailing yield of 1.3% on the current share price of CN¥77.83. 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.

Check out our latest analysis for Shenzhen New Industries Biomedical Engineering

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Shenzhen New Industries Biomedical Engineering paying out a modest 46% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 48% of its free cash flow in the past 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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Shenzhen New Industries Biomedical Engineering's earnings per share have been growing at 17% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Shenzhen New Industries Biomedical Engineering's dividend payments per share have declined at 11% per year on average over the past four years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

To Sum It Up

Is Shenzhen New Industries Biomedical Engineering an attractive dividend stock, or better left on the shelf? It's great that Shenzhen New Industries Biomedical Engineering 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. There's a lot to like about Shenzhen New Industries Biomedical Engineering, and we would prioritise taking a closer look at it.

In light of that, while Shenzhen New Industries Biomedical Engineering has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Shenzhen New Industries Biomedical Engineering you should know about.

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.