Should Income Investors Look At Shanghai Shunho New Materials Technology Co.,Ltd. (SZSE:002565) Before Its Ex-Dividend?

Shanghai Shunho New Materials Technology Co.,Ltd. (SZSE:002565) is about to trade ex-dividend in the next four 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Shanghai Shunho New Materials TechnologyLtd investors that purchase the stock on or after the 8th of July will not receive the dividend, which will be paid on the 8th of July.

The company's upcoming dividend is CN¥0.026 a share, following on from the last 12 months, when the company distributed a total of CN¥0.026 per share to shareholders. Looking at the last 12 months of distributions, Shanghai Shunho New Materials TechnologyLtd has a trailing yield of approximately 1.0% on its current stock price of CN¥2.55. 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 investigate whether Shanghai Shunho New Materials TechnologyLtd can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Shanghai Shunho New Materials TechnologyLtd

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. Shanghai Shunho New Materials TechnologyLtd is paying out an acceptable 62% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Shanghai Shunho New Materials TechnologyLtd generated enough free cash flow to afford its dividend. The good news is it paid out just 5.0% of its free cash flow in the last 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 how much of its profit Shanghai Shunho New Materials TechnologyLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Shanghai Shunho New Materials TechnologyLtd's earnings per share have fallen at approximately 17% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Shanghai Shunho New Materials TechnologyLtd has seen its dividend decline 5.0% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Should investors buy Shanghai Shunho New Materials TechnologyLtd for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, it's hard to get excited about Shanghai Shunho New Materials TechnologyLtd from a dividend perspective.

If you want to look further into Shanghai Shunho New Materials TechnologyLtd, it's worth knowing the risks this business faces. Our analysis shows 1 warning sign for Shanghai Shunho New Materials TechnologyLtd and you should be aware of this before buying any 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