Is It Worth Considering Guangdong Tecsun Science & Technology Co.,Ltd. (SZSE:002908) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Guangdong Tecsun Science & Technology Co.,Ltd. (SZSE:002908) is about to trade ex-dividend in the next three 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Guangdong Tecsun Science & TechnologyLtd's shares on or after the 31st of May, you won't be eligible to receive the dividend, when it is paid on the 31st of May.

The company's next dividend payment will be CN¥0.05 per share. Last year, in total, the company distributed CN¥0.05 to shareholders. Looking at the last 12 months of distributions, Guangdong Tecsun Science & TechnologyLtd has a trailing yield of approximately 0.6% on its current stock price of CN¥8.45. 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! So we need to investigate whether Guangdong Tecsun Science & TechnologyLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for Guangdong Tecsun Science & TechnologyLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Guangdong Tecsun Science & TechnologyLtd'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. Thankfully its dividend payments took up just 25% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Guangdong Tecsun Science & TechnologyLtd'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 Guangdong Tecsun Science & TechnologyLtd 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Guangdong Tecsun Science & TechnologyLtd's earnings per share have been shrinking at 4.1% 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. Guangdong Tecsun Science & TechnologyLtd's dividend payments per share have declined at 5.0% per year on average over the past six years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Guangdong Tecsun Science & TechnologyLtd? 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. All things considered, we are not particularly enthused about Guangdong Tecsun Science & TechnologyLtd from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Guangdong Tecsun Science & TechnologyLtd has 1 warning sign 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.