Here's What We Like About Aoshikang Technology's (SZSE:002913) Upcoming Dividend

It looks like Aoshikang Technology Co., Ltd. (SZSE:002913) is about to go 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 Aoshikang Technology's shares on or after the 30th of May, you won't be eligible to receive the dividend, when it is paid on the 30th of May.

The company's next dividend payment will be CN¥0.315 per share, and in the last 12 months, the company paid a total of CN¥0.63 per share. Looking at the last 12 months of distributions, Aoshikang Technology has a trailing yield of approximately 2.5% on its current stock price of CN¥25.61. 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.

View our latest analysis for Aoshikang 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. Aoshikang Technology paid out 63% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Aoshikang 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 Aoshikang Technology paid out over the last 12 months.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Aoshikang Technology's earnings per share have risen 14% per annum over the last five years. Aoshikang Technology has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Aoshikang Technology has delivered an average of 26% per year annual increase in its dividend, based on the past six years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

From a dividend perspective, should investors buy or avoid Aoshikang Technology? We like Aoshikang Technology's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Aoshikang Technology for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Aoshikang Technology 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.