Yongxing Special Materials Technology Co.,Ltd (SZSE:002756) Goes Ex-Dividend Soon

Readers hoping to buy Yongxing Special Materials Technology Co.,Ltd (SZSE:002756) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 Yongxing Special Materials TechnologyLtd's shares before the 30th of May to receive the dividend, which will be paid on the 30th of May.

The company's upcoming dividend is CN¥2.00 a share, following on from the last 12 months, when the company distributed a total of CN¥4.00 per share to shareholders. Looking at the last 12 months of distributions, Yongxing Special Materials TechnologyLtd has a trailing yield of approximately 8.9% on its current stock price of CN¥44.90. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Yongxing Special Materials TechnologyLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Yongxing Special Materials TechnologyLtd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Yongxing Special Materials TechnologyLtd is paying out an acceptable 55% of its profit, a common payout level among most companies. 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. Over the past year it paid out 126% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Yongxing Special Materials TechnologyLtd does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Yongxing Special Materials TechnologyLtd paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Yongxing Special Materials TechnologyLtd's ability to maintain its dividend.

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. That's why it's comforting to see Yongxing Special Materials TechnologyLtd's earnings have been skyrocketing, up 46% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past eight years, Yongxing Special Materials TechnologyLtd has increased its dividend at approximately 62% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Yongxing Special Materials TechnologyLtd got what it takes to maintain its dividend payments? 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 126% of its cashflow, which is uncomfortably high. In summary, while it has some positive characteristics, we're not inclined to race out and buy Yongxing Special Materials TechnologyLtd today.

With that being said, if dividends aren't your biggest concern with Yongxing Special Materials TechnologyLtd, you should know about the other risks facing this business. For example, we've found 4 warning signs for Yongxing Special Materials TechnologyLtd (2 are significant!) that deserve your attention before investing in the 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.