Shanghai Huace Navigation Technology Ltd (SZSE:300627) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shanghai Huace Navigation Technology Ltd (SZSE:300627) is about to trade ex-dividend in the next 4 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Shanghai Huace Navigation Technology's shares before the 12th of June to receive the dividend, which will be paid on the 12th of June.

The company's next dividend payment will be CN¥0.35 per share, and in the last 12 months, the company paid a total of CN¥0.35 per share. Based on the last year's worth of payments, Shanghai Huace Navigation Technology has a trailing yield of 1.2% on the current stock price of CN¥28.26. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Shanghai Huace Navigation Technology can afford its dividend, and if the dividend could grow.

See our latest analysis for Shanghai Huace Navigation Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Shanghai Huace Navigation Technology paying out a modest 40% of its earnings. 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. It paid out more than half (58%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Shanghai Huace Navigation 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 the company's payout ratio, plus analyst estimates of its future dividends.

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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Shanghai Huace Navigation Technology has grown its earnings rapidly, up 31% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past six years, Shanghai Huace Navigation Technology has increased its dividend at approximately 31% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Should investors buy Shanghai Huace Navigation Technology for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Shanghai Huace Navigation Technology paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Shanghai Huace Navigation Technology has 1 warning sign we think 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.