Should Income Investors Look At Beijing Yuanliu Hongyuan Electronic Technology Co., Ltd. (SHSE:603267) Before Its Ex-Dividend?

Beijing Yuanliu Hongyuan Electronic Technology Co., Ltd. (SHSE:603267) is about to trade ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Beijing Yuanliu Hongyuan Electronic Technology investors that purchase the stock on or after the 14th of May will not receive the dividend, which will be paid on the 14th of May.

The company's upcoming dividend is CN¥0.35 a share, following on from the last 12 months, when the company distributed a total of CN¥0.35 per share to shareholders. Based on the last year's worth of payments, Beijing Yuanliu Hongyuan Electronic Technology has a trailing yield of 1.0% on the current stock price of CN¥36.18. 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 Beijing Yuanliu Hongyuan Electronic Technology

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Beijing Yuanliu Hongyuan Electronic Technology's payout ratio is modest, at just 33% of profit. 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. Luckily it paid out just 19% of its free cash flow last year.

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 Beijing Yuanliu Hongyuan Electronic Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see Beijing Yuanliu Hongyuan Electronic Technology's earnings per share have been shrinking at 3.5% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Beijing Yuanliu Hongyuan Electronic Technology has seen its dividend decline 13% per annum on average over the past five years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Is Beijing Yuanliu Hongyuan Electronic Technology an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Beijing Yuanliu Hongyuan Electronic Technology's dividend merits.

In light of that, while Beijing Yuanliu Hongyuan Electronic Technology has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Beijing Yuanliu Hongyuan Electronic Technology has 2 warning signs we think you should be aware of.

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.