Three Days Left To Buy Qingdao Topscomm Communication INC. (SHSE:603421) Before The Ex-Dividend Date

Qingdao Topscomm Communication INC. (SHSE:603421) is about to trade ex-dividend in the next 3 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Qingdao Topscomm Communication investors that purchase the stock on or after the 27th of June will not receive the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be CN¥0.061 per share. Last year, in total, the company distributed CN¥0.061 to shareholders. Based on the last year's worth of payments, Qingdao Topscomm Communication stock has a trailing yield of around 1.3% on the current share price of CN¥4.67. 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 Qingdao Topscomm Communication

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. That's why it's good to see Qingdao Topscomm Communication paying out a modest 47% of its earnings. A useful secondary check can be to evaluate whether Qingdao Topscomm Communication generated enough free cash flow to afford its dividend. It paid out more than half (58%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Qingdao Topscomm Communication'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 Qingdao Topscomm Communication paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Qingdao Topscomm Communication's earnings per share have fallen at approximately 17% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

We'd also point out that Qingdao Topscomm Communication 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Qingdao Topscomm Communication has seen its dividend decline 12% per annum on average over the past seven years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Has Qingdao Topscomm Communication got what it takes to maintain its dividend payments? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. Overall, it's hard to get excited about Qingdao Topscomm Communication from a dividend perspective.

If you're not too concerned about Qingdao Topscomm Communication's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To that end, you should learn about the 3 warning signs we've spotted with Qingdao Topscomm Communication (including 1 which shouldn't be ignored).

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.

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