Why You Might Be Interested In Satellite Chemical Co.,Ltd. (SZSE:002648) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Satellite Chemical Co.,Ltd. (SZSE:002648) is about to trade ex-dividend in the next 3 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, Satellite ChemicalLtd investors that purchase the stock on or after the 14th of May will not receive the dividend, which will be paid on the 14th of May.

The company's next dividend payment will be CN¥0.40 per share, on the back of last year when the company paid a total of CN¥0.40 to shareholders. Based on the last year's worth of payments, Satellite ChemicalLtd has a trailing yield of 2.0% on the current stock price of CN¥19.90. If you buy this business for its dividend, you should have an idea of whether Satellite ChemicalLtd's dividend is reliable and sustainable. As a result, readers should always check whether Satellite ChemicalLtd has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Satellite ChemicalLtd

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. Satellite ChemicalLtd paid out a comfortable 26% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 9.4% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Satellite ChemicalLtd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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 Satellite ChemicalLtd has grown its earnings rapidly, up 36% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Satellite ChemicalLtd has lifted its dividend by approximately 20% 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 Satellite ChemicalLtd an attractive dividend stock, or better left on the shelf? It's great that Satellite ChemicalLtd 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. Satellite ChemicalLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Satellite ChemicalLtd has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Satellite ChemicalLtd has 1 warning sign we think you should be aware of.

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.