Three Days Left Until Shenzhen Kaifa Technology Co., Ltd. (SZSE:000021) Trades Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shenzhen Kaifa Technology Co., Ltd. (SZSE:000021) is about to trade ex-dividend in the next three 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 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, Shenzhen Kaifa Technology investors that purchase the stock on or after the 27th of June will not receive the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be CN¥0.13 per share, and in the last 12 months, the company paid a total of CN¥0.13 per share. Based on the last year's worth of payments, Shenzhen Kaifa Technology stock has a trailing yield of around 0.9% on the current share price of CN¥15.28. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Shenzhen Kaifa Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shenzhen Kaifa Technology paid out a comfortable 30% 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. Dividends consumed 57% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Shenzhen Kaifa Technology'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 how much of its profit Shenzhen Kaifa Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Shenzhen Kaifa Technology's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Shenzhen Kaifa Technology has delivered an average of 10% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Final Takeaway

Is Shenzhen Kaifa Technology an attractive dividend stock, or better left on the shelf? Earnings per share have been flat over the 10-year timeframe we consider, and Shenzhen Kaifa Technology paid out less than half its earnings and more than half its free cashflow over the last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Shenzhen Kaifa Technology's dividend merits.

In light of that, while Shenzhen Kaifa Technology has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Shenzhen Kaifa Technology 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.

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