Sunresin New MaterialsLtd (SZSE:300487) Could Be A Buy For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Sunresin New Materials Co.,Ltd (SZSE:300487) is about to go ex-dividend in just 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, Sunresin New MaterialsLtd investors that purchase the stock on or after the 24th of July will not receive the dividend, which will be paid on the 24th of July.

The company's upcoming dividend is CN¥0.568 a share, following on from the last 12 months, when the company distributed a total of CN¥0.57 per share to shareholders. Calculating the last year's worth of payments shows that Sunresin New MaterialsLtd has a trailing yield of 1.4% on the current share price of CN¥40.65. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Sunresin New MaterialsLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Sunresin New MaterialsLtd's payout ratio is modest, at just 38% of profit. 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. Over the last year it paid out 54% of its free cash flow as dividends, within the usual 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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Sunresin New MaterialsLtd's earnings have been skyrocketing, up 36% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past eight years, Sunresin New MaterialsLtd has increased its dividend at approximately 38% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has Sunresin New MaterialsLtd got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Sunresin New MaterialsLtd paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

So while Sunresin New MaterialsLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Sunresin New MaterialsLtd that we strongly recommend you have a look at before investing in the company.

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