Only Two Days Left To Cash In On Ningbo Exciton Technology's (SZSE:300566) Dividend

It looks like Ningbo Exciton Technology Co., Ltd. (SZSE:300566) is about to go ex-dividend in the next 2 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Ningbo Exciton Technology's shares on or after the 24th of May will not receive the dividend, which will be paid on the 24th of May.

The company's upcoming dividend is CN¥0.15 a share, following on from the last 12 months, when the company distributed a total of CN¥0.15 per share to shareholders. Based on the last year's worth of payments, Ningbo Exciton Technology has a trailing yield of 1.0% on the current stock price of CN¥14.85. If you buy this business for its dividend, you should have an idea of whether Ningbo Exciton Technology's dividend is reliable and sustainable. As a result, readers should always check whether Ningbo Exciton Technology has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Ningbo Exciton Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ningbo Exciton Technology has a low and conservative payout ratio of just 24% of its income after tax. 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 119% 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.

Ningbo Exciton Technology paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Ningbo Exciton Technology to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Ningbo Exciton Technology has grown its earnings rapidly, up 29% a year 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last seven years, Ningbo Exciton Technology has lifted its dividend by approximately 12% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Ningbo Exciton Technology an attractive dividend stock, or better left on the shelf? We like that Ningbo Exciton Technology has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. In summary, it's hard to get excited about Ningbo Exciton Technology from a dividend perspective.

So while Ningbo Exciton Technology looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 2 warning signs for Ningbo Exciton Technology that we recommend you consider before investing in the business.

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.