Only Four Days Left To Cash In On 3onedata's (SHSE:688618) Dividend

3onedata Co., Ltd. (SHSE:688618) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase 3onedata's shares before the 11th of June to receive the dividend, which will be paid on the 11th of June.

The company's next dividend payment will be CN¥0.52 per share, on the back of last year when the company paid a total of CN¥0.52 to shareholders. Calculating the last year's worth of payments shows that 3onedata has a trailing yield of 1.3% on the current share price of CN¥39.58. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for 3onedata

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. That's why it's good to see 3onedata paying out a modest 35% of its earnings. A useful secondary check can be to evaluate whether 3onedata generated enough free cash flow to afford its dividend. Dividends consumed 55% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see 3onedata earnings per share are up 7.3% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, three years ago, 3onedata has lifted its dividend by approximately 24% 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 3onedata got what it takes to maintain its dividend payments? Earnings per share growth has been modest, and it's interesting that 3onedata is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. All things considered, we are not particularly enthused about 3onedata from a dividend perspective.

So while 3onedata looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with 3onedata and understanding them should be part of your investment process.

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.