Income Investors Should Know That Yangling Metron New Material Inc. (SZSE:300861) Goes Ex-Dividend Soon

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 Yangling Metron New Material Inc. (SZSE:300861) is about to go ex-dividend in just 3 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 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. Accordingly, Yangling Metron New Material investors that purchase the stock on or after the 5th of July will not receive the dividend, which will be paid on the 5th of July.

The company's next dividend payment will be CN¥0.15 per share. Last year, in total, the company distributed CN¥0.15 to shareholders. Calculating the last year's worth of payments shows that Yangling Metron New Material has a trailing yield of 0.8% on the current share price of CN¥19.48. If you buy this business for its dividend, you should have an idea of whether Yangling Metron New Material's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Yangling Metron New Material

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. Yangling Metron New Material has a low and conservative payout ratio of just 5.1% of its income after tax. A useful secondary check can be to evaluate whether Yangling Metron New Material generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (78%) 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 the company's payout ratio, plus analyst estimates of its future dividends.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Yangling Metron New Material's flat earnings 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 high payout ratio of 5.1% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Yangling Metron New Material could be signalling that its future growth prospects are thin.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Yangling Metron New Material's dividend payments per share have declined at 29% per year on average over the past three years, which is uninspiring.

Final Takeaway

Is Yangling Metron New Material an attractive dividend stock, or better left on the shelf? Yangling Metron New Material has struggled to grow earnings per share, and it's paying out less than half of its earnings and more than half its cash flow to shareholders as dividends. All things considered, we are not particularly enthused about Yangling Metron New Material from a dividend perspective.

While it's tempting to invest in Yangling Metron New Material for the dividends alone, you should always be mindful of the risks involved. We've identified 3 warning signs with Yangling Metron New Material (at least 2 which don't sit too well with us), and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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