Should You Buy Southern Publishing and Media Co.,Ltd. (SHSE:601900) 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 Southern Publishing and Media Co.,Ltd. (SHSE:601900) is about to go ex-dividend in just couple of days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Southern Publishing and MediaLtd's shares before the 1st of July in order to receive the dividend, which the company will pay on the 1st of July.

The company's next dividend payment will be CN¥0.54 per share, on the back of last year when the company paid a total of CN¥0.54 to shareholders. Calculating the last year's worth of payments shows that Southern Publishing and MediaLtd has a trailing yield of 4.3% on the current share price of CN¥12.43. If you buy this business for its dividend, you should have an idea of whether Southern Publishing and MediaLtd's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Southern Publishing and MediaLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Southern Publishing and MediaLtd paying out a modest 39% of its earnings. A useful secondary check can be to evaluate whether Southern Publishing and MediaLtd generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (89%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Southern Publishing and MediaLtd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Southern Publishing and MediaLtd's earnings per share have risen 13% per annum over the last five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Southern Publishing and MediaLtd has delivered 23% dividend growth per year on average over the past eight years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Has Southern Publishing and MediaLtd 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, Southern Publishing and MediaLtd paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Southern Publishing and MediaLtd, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for Southern Publishing and MediaLtd you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com