Guangdong Decro Film New Materials Co., Ltd. (SZSE:001378) Will Pay A CN¥0.20 Dividend In Three Days

Guangdong Decro Film New Materials Co., Ltd. (SZSE:001378) stock is about to trade ex-dividend in 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Accordingly, Guangdong Decro Film New Materials investors that purchase the stock on or after the 20th of December will not receive the dividend, which will be paid on the 20th of December.

The company's next dividend payment will be CN¥0.20 per share. Last year, in total, the company distributed CN¥0.45 to shareholders. Looking at the last 12 months of distributions, Guangdong Decro Film New Materials has a trailing yield of approximately 1.8% on its current stock price of CN¥24.76. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Guangdong Decro Film New Materials

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. Guangdong Decro Film New Materials paid out more than half (64%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Guangdong Decro Film New Materials generated enough free cash flow to afford its dividend.

Click here to see how much of its profit Guangdong Decro Film New Materials paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Guangdong Decro Film New Materials's earnings per share have been growing at 18% a year for the past five years.

We'd also point out that Guangdong Decro Film New Materials issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Given that Guangdong Decro Film New Materials has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Should investors buy Guangdong Decro Film New Materials for the upcoming dividend? 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 -101% of its cashflow, which is uncomfortably high. All things considered, we are not particularly enthused about Guangdong Decro Film New Materials from a dividend perspective.

However if you're still interested in Guangdong Decro Film New Materials as a potential investment, you should definitely consider some of the risks involved with Guangdong Decro Film New Materials. Our analysis shows 2 warning signs for Guangdong Decro Film New Materials and you should be aware of them before buying any 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.

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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.