DuZhe Publish&Media Co.,Ltd (SHSE:603999) Looks Interesting, And It's About To Pay A Dividend

DuZhe Publish&Media Co.,Ltd (SHSE:603999) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase DuZhe Publish&MediaLtd's shares before the 13th of June to receive the dividend, which will be paid on the 13th of June.

The company's upcoming dividend is CN¥0.052 a share, following on from the last 12 months, when the company distributed a total of CN¥0.052 per share to shareholders. Based on the last year's worth of payments, DuZhe Publish&MediaLtd stock has a trailing yield of around 1.1% on the current share price of CN¥4.91. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for DuZhe Publish&MediaLtd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. DuZhe Publish&MediaLtd paid out a comfortable 30% of its profit last year. A useful secondary check can be to evaluate whether DuZhe Publish&MediaLtd generated enough free cash flow to afford its dividend. Luckily it paid out just 12% of its free cash flow last year.

It's positive to see that DuZhe Publish&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 how much of its profit DuZhe Publish&MediaLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, DuZhe Publish&MediaLtd's earnings per share have been growing at 20% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. DuZhe Publish&MediaLtd's dividend payments per share have declined at 0.5% per year on average over the past eight years, which is uninspiring.

Final Takeaway

From a dividend perspective, should investors buy or avoid DuZhe Publish&MediaLtd? DuZhe Publish&MediaLtd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past eight years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

So while DuZhe Publish&MediaLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for DuZhe Publish&MediaLtd that you should be aware of before investing in their shares.

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.