Is It Worth Considering ShenZhen YUTO Packaging Technology Co., Ltd. (SZSE:002831) 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 ShenZhen YUTO Packaging Technology Co., Ltd. (SZSE:002831) is about to trade ex-dividend in the next three 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. 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 ShenZhen YUTO Packaging Technology's shares on or after the 11th of October, you won't be eligible to receive the dividend, when it is paid on the 11th of October.

The company's next dividend payment will be CN¥0.330235 per share, on the back of last year when the company paid a total of CN¥0.95 to shareholders. Based on the last year's worth of payments, ShenZhen YUTO Packaging Technology stock has a trailing yield of around 3.7% on the current share price of CN¥25.72. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for ShenZhen YUTO Packaging Technology

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. ShenZhen YUTO Packaging Technology paid out 58% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (64%) 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 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. With that in mind, we're encouraged by the steady growth at ShenZhen YUTO Packaging Technology, with earnings per share up 8.8% on average over the last five years. Decent historical earnings per share growth suggests ShenZhen YUTO Packaging Technology has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. ShenZhen YUTO Packaging Technology has delivered 23% dividend growth per year on average over the past seven years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is ShenZhen YUTO Packaging Technology an attractive dividend stock, or better left on the shelf? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. All things considered, we are not particularly enthused about ShenZhen YUTO Packaging Technology from a dividend perspective.

With that being said, if dividends aren't your biggest concern with ShenZhen YUTO Packaging Technology, you should know about the other risks facing this business. In terms of investment risks, we've identified 1 warning sign with ShenZhen YUTO Packaging Technology and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.