Only Four Days Left To Cash In On Shanghai Prisemi ElectronicsLtd's (SHSE:688230) 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 Shanghai Prisemi Electronics Co.,Ltd. (SHSE:688230) is about to go ex-dividend in just 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Thus, you can purchase Shanghai Prisemi ElectronicsLtd's shares before the 25th of June in order to receive the dividend, which the company will pay on the 25th of June.

The company's next dividend payment will be CN¥0.60 per share. Last year, in total, the company distributed CN¥0.60 to shareholders. Based on the last year's worth of payments, Shanghai Prisemi ElectronicsLtd stock has a trailing yield of around 1.5% on the current share price of CN¥40.09. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Shanghai Prisemi ElectronicsLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shanghai Prisemi ElectronicsLtd paid out 68% of its earnings to investors last year, a normal payout level for most businesses. 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. Over the last year, it paid out more than three-quarters (85%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Shanghai Prisemi ElectronicsLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Shanghai Prisemi ElectronicsLtd's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. A payout ratio of 68% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Shanghai Prisemi ElectronicsLtd has delivered 40% dividend growth per year on average over the past two years.

The Bottom Line

Has Shanghai Prisemi ElectronicsLtd got what it takes to maintain its dividend payments? Earnings per share have barely grown, and although Shanghai Prisemi ElectronicsLtd paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. In summary, while it has some positive characteristics, we're not inclined to race out and buy Shanghai Prisemi ElectronicsLtd today.

If you want to look further into Shanghai Prisemi ElectronicsLtd, it's worth knowing the risks this business faces. To help with this, we've discovered 1 warning sign for Shanghai Prisemi ElectronicsLtd 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.

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

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