Shandong Weigao Group Medical Polymer Company Limited (HKG:1066) Passed Our Checks, And It's About To Pay A CN¥0.0943 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Shandong Weigao Group Medical Polymer Company Limited (HKG:1066) is about to go ex-dividend in just four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Accordingly, Shandong Weigao Group Medical Polymer investors that purchase the stock on or after the 3rd of June will not receive the dividend, which will be paid on the 12th of July.

The company's next dividend payment will be CN¥0.0943 per share, and in the last 12 months, the company paid a total of CN¥0.17 per share. Looking at the last 12 months of distributions, Shandong Weigao Group Medical Polymer has a trailing yield of approximately 3.7% on its current stock price of HK$4.83. If you buy this business for its dividend, you should have an idea of whether Shandong Weigao Group Medical Polymer's dividend is reliable and sustainable. So we need to investigate whether Shandong Weigao Group Medical Polymer can afford its dividend, and if the dividend could grow.

View our latest analysis for Shandong Weigao Group Medical Polymer

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. Shandong Weigao Group Medical Polymer paid out a comfortable 38% of its profit last year. A useful secondary check can be to evaluate whether Shandong Weigao Group Medical Polymer generated enough free cash flow to afford its dividend. Fortunately, it paid out only 35% of its free cash flow in the past year.

It's positive to see that Shandong Weigao Group Medical Polymer'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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Shandong Weigao Group Medical Polymer earnings per share are up 5.9% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Shandong Weigao Group Medical Polymer has lifted its dividend by approximately 10% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Shandong Weigao Group Medical Polymer for the upcoming dividend? Earnings per share growth has been growing somewhat, and Shandong Weigao Group Medical Polymer is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Shandong Weigao Group Medical Polymer is being conservative with its dividend payouts and could still perform reasonably over the long run. Shandong Weigao Group Medical Polymer looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Shandong Weigao Group Medical Polymer is facing. Our analysis shows 1 warning sign for Shandong Weigao Group Medical Polymer and you should be aware of it before buying any shares.

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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.