Beijing Huafeng Test & Control Technology Co.,Ltd. (SHSE:688200) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Beijing Huafeng Test & Control Technology Co.,Ltd. (SHSE:688200) stock is about to trade ex-dividend in 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 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. In other words, investors can purchase Beijing Huafeng Test & Control TechnologyLtd's shares before the 6th of June in order to be eligible for the dividend, which will be paid on the 6th of June.

The company's next dividend payment will be CN¥0.56 per share, and in the last 12 months, the company paid a total of CN¥0.56 per share. Calculating the last year's worth of payments shows that Beijing Huafeng Test & Control TechnologyLtd has a trailing yield of 0.5% on the current share price of CN¥112.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Beijing Huafeng Test & Control TechnologyLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for Beijing Huafeng Test & Control TechnologyLtd

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. Beijing Huafeng Test & Control TechnologyLtd paid out a comfortable 38% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Beijing Huafeng Test & Control TechnologyLtd'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?

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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Beijing Huafeng Test & Control TechnologyLtd earnings per share are up 8.5% per annum over the last five years. Decent historical earnings per share growth suggests Beijing Huafeng Test & Control TechnologyLtd has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, four years ago, Beijing Huafeng Test & Control TechnologyLtd has lifted its dividend by approximately 20% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has Beijing Huafeng Test & Control TechnologyLtd got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Beijing Huafeng Test & Control TechnologyLtd paid out less than half its profits and more than half its free cash flow as dividends over the last year. To summarise, Beijing Huafeng Test & Control TechnologyLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Beijing Huafeng Test & Control TechnologyLtd for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Beijing Huafeng Test & Control TechnologyLtd that you should be aware of before investing in their shares.

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.