Be Sure To Check Out Suzhou TFC Optical Communication Co., Ltd. (SZSE:300394) Before It Goes Ex-Dividend

Suzhou TFC Optical Communication Co., Ltd. (SZSE:300394) is about to trade ex-dividend in the next 2 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. 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. Thus, you can purchase Suzhou TFC Optical Communication's shares before the 30th of May in order to receive the dividend, which the company will pay on the 30th of May.

The company's next dividend payment will be CN¥1.00 per share, and in the last 12 months, the company paid a total of CN¥1.00 per share. Calculating the last year's worth of payments shows that Suzhou TFC Optical Communication has a trailing yield of 0.8% on the current share price of CN¥130.81. If you buy this business for its dividend, you should have an idea of whether Suzhou TFC Optical Communication's dividend is reliable and sustainable. So we need to investigate whether Suzhou TFC Optical Communication can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Suzhou TFC Optical Communication

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Suzhou TFC Optical Communication paid out a comfortable 43% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Suzhou TFC Optical Communication's earnings have been skyrocketing, up 42% per annum 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Suzhou TFC Optical Communication has delivered an average of 28% per year annual increase in its dividend, based on the past nine years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is Suzhou TFC Optical Communication an attractive dividend stock, or better left on the shelf? We love that Suzhou TFC Optical Communication is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 3 warning signs for Suzhou TFC Optical Communication (1 is a bit unpleasant) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.