Four Days Left Until Anhui Hongyu Wuzhou Medical Manufacturer Co.,LTD. (SZSE:301234) Trades Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Anhui Hongyu Wuzhou Medical Manufacturer Co.,LTD. (SZSE:301234) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Therefore, if you purchase Anhui Hongyu Wuzhou Medical ManufacturerLTD's shares on or after the 25th of June, you won't be eligible to receive the dividend, when it is paid on the 25th of June.

The company's upcoming dividend is CN¥0.40 a share, following on from the last 12 months, when the company distributed a total of CN¥0.40 per share to shareholders. Based on the last year's worth of payments, Anhui Hongyu Wuzhou Medical ManufacturerLTD has a trailing yield of 1.9% on the current stock price of CN¥21.57. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Anhui Hongyu Wuzhou Medical ManufacturerLTD

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 Anhui Hongyu Wuzhou Medical ManufacturerLTD paying out a modest 48% of its earnings. A useful secondary check can be to evaluate whether Anhui Hongyu Wuzhou Medical ManufacturerLTD generated enough free cash flow to afford its dividend. It paid out more than half (73%) 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 Anhui Hongyu Wuzhou Medical ManufacturerLTD paid out over the last 12 months.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Anhui Hongyu Wuzhou Medical ManufacturerLTD, with earnings per share up 5.0% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Unfortunately Anhui Hongyu Wuzhou Medical ManufacturerLTD has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Should investors buy Anhui Hongyu Wuzhou Medical ManufacturerLTD for the upcoming dividend? Earnings per share have been growing at a steady rate, and Anhui Hongyu Wuzhou Medical ManufacturerLTD paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in Anhui Hongyu Wuzhou Medical ManufacturerLTD for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Anhui Hongyu Wuzhou Medical ManufacturerLTD that you should be aware of before investing in their shares.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com