Is It Smart To Buy Unigroup Guoxin Microelectronics Co., Ltd. (SZSE:002049) Before It Goes Ex-Dividend?

Unigroup Guoxin Microelectronics Co., Ltd. (SZSE:002049) is about to trade ex-dividend in the next four 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Unigroup Guoxin Microelectronics' shares on or after the 24th of June, you won't be eligible to receive the dividend, when it is paid on the 24th of June.

The company's upcoming dividend is CN¥0.68 a share, following on from the last 12 months, when the company distributed a total of CN¥0.68 per share to shareholders. Calculating the last year's worth of payments shows that Unigroup Guoxin Microelectronics has a trailing yield of 1.2% on the current share price of CN¥58.70. 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.

View our latest analysis for Unigroup Guoxin Microelectronics

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Unigroup Guoxin Microelectronics paid out a comfortable 25% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 1.8% of its cash flow last year.

It's positive to see that Unigroup Guoxin Microelectronics'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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Unigroup Guoxin Microelectronics's earnings have been skyrocketing, up 46% per annum for the past five years. Unigroup Guoxin Microelectronics is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Unigroup Guoxin Microelectronics has lifted its dividend by approximately 34% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Unigroup Guoxin Microelectronics? It's great that Unigroup Guoxin Microelectronics is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

So while Unigroup Guoxin Microelectronics looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for Unigroup Guoxin Microelectronics that we recommend you consider before investing in the business.

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.

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