Interested In Xinxiang Richful Lube AdditiveLtd's (SZSE:300910) Upcoming CN¥1.30 Dividend? You Have Four Days Left

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Xinxiang Richful Lube Additive Co.,Ltd. (SZSE:300910) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Accordingly, Xinxiang Richful Lube AdditiveLtd investors that purchase the stock on or after the 28th of May will not receive the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be CN¥1.30 per share, and in the last 12 months, the company paid a total of CN¥1.30 per share. Based on the last year's worth of payments, Xinxiang Richful Lube AdditiveLtd stock has a trailing yield of around 2.7% on the current share price of CN¥47.59. 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! As a result, readers should always check whether Xinxiang Richful Lube AdditiveLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Xinxiang Richful Lube AdditiveLtd

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. Xinxiang Richful Lube AdditiveLtd paid out a comfortable 45% of its profit last year. A useful secondary check can be to evaluate whether Xinxiang Richful Lube AdditiveLtd generated enough free cash flow to afford its dividend. Xinxiang Richful Lube AdditiveLtd paid out more free cash flow than it generated - 193%, to be precise - last year, which we think is concerningly 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.

While Xinxiang Richful Lube AdditiveLtd's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Xinxiang Richful Lube AdditiveLtd'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?

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Xinxiang Richful Lube AdditiveLtd has grown its earnings rapidly, up 47% 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Xinxiang Richful Lube AdditiveLtd has delivered 46% dividend growth per year on average over the past three years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Should investors buy Xinxiang Richful Lube AdditiveLtd for the upcoming dividend? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's hard to get excited about Xinxiang Richful Lube AdditiveLtd from a dividend perspective.

On that note, you'll want to research what risks Xinxiang Richful Lube AdditiveLtd is facing. Be aware that Xinxiang Richful Lube AdditiveLtd is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

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.