Anhui Sunhere Pharmaceutical ExcipientsLtd (SZSE:300452) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy Anhui Sunhere Pharmaceutical Excipients Co.,Ltd. (SZSE:300452) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Therefore, if you purchase Anhui Sunhere Pharmaceutical ExcipientsLtd's shares on or after the 29th of May, you won't be eligible to receive the dividend, when it is paid on the 29th of May.

The company's next dividend payment will be CN¥0.25 per share. Last year, in total, the company distributed CN¥0.25 to shareholders. Based on the last year's worth of payments, Anhui Sunhere Pharmaceutical ExcipientsLtd stock has a trailing yield of around 1.9% on the current share price of CN¥13.02. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Anhui Sunhere Pharmaceutical ExcipientsLtd

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Anhui Sunhere Pharmaceutical ExcipientsLtd paid out a comfortable 36% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (75%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Anhui Sunhere Pharmaceutical ExcipientsLtd'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 Anhui Sunhere Pharmaceutical ExcipientsLtd paid out over the last 12 months.

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. For this reason, we're glad to see Anhui Sunhere Pharmaceutical ExcipientsLtd's earnings per share have risen 19% per annum over the last five years. Anhui Sunhere Pharmaceutical ExcipientsLtd has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

We'd also point out that Anhui Sunhere Pharmaceutical ExcipientsLtd issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, Anhui Sunhere Pharmaceutical ExcipientsLtd has lifted its dividend by approximately 26% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Anhui Sunhere Pharmaceutical ExcipientsLtd worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of 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.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for Anhui Sunhere Pharmaceutical ExcipientsLtd and you should be aware of it before buying any shares.

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.