Here's What We Like About XGD's (SZSE:300130) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see XGD Inc. (SZSE:300130) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. In other words, investors can purchase XGD's shares before the 17th of June in order to be eligible for the dividend, which will be paid on the 17th of June.

The company's next dividend payment will be CN¥0.67 per share. Last year, in total, the company distributed CN¥0.67 to shareholders. Calculating the last year's worth of payments shows that XGD has a trailing yield of 3.4% on the current share price of CN¥19.65. 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.

See our latest analysis for XGD

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 XGD paying out a modest 42% of its earnings. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 11% of its 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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see XGD has grown its earnings rapidly, up 24% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

We'd also point out that XGD issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, XGD has lifted its dividend by approximately 37% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is XGD an attractive dividend stock, or better left on the shelf? It's great that XGD is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. XGD looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while XGD looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - XGD 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.