Here's What We Like About Beijing Chunlizhengda Medical Instruments' (HKG:1858) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Beijing Chunlizhengda Medical Instruments Co., Ltd. (HKG:1858) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 Beijing Chunlizhengda Medical Instruments' shares on or after the 2nd of July, you won't be eligible to receive the dividend, when it is paid on the 31st of July.

The company's next dividend payment will be CN¥0.362 per share, on the back of last year when the company paid a total of CN¥0.36 to shareholders. Calculating the last year's worth of payments shows that Beijing Chunlizhengda Medical Instruments has a trailing yield of 4.5% on the current share price of HK$8.69. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Beijing Chunlizhengda Medical Instruments

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Beijing Chunlizhengda Medical Instruments is paying out an acceptable 51% of its profit, a common payout level among most companies. 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. Fortunately, it paid out only 26% of its free cash flow in the past year.

It's positive to see that Beijing Chunlizhengda Medical Instruments'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?

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. Fortunately for readers, Beijing Chunlizhengda Medical Instruments's earnings per share have been growing at 19% a year for the past five years. Beijing Chunlizhengda Medical Instruments is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past nine years, Beijing Chunlizhengda Medical Instruments has increased its dividend at approximately 40% a year on average. 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

Has Beijing Chunlizhengda Medical Instruments got what it takes to maintain its dividend payments? Beijing Chunlizhengda Medical Instruments's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Beijing Chunlizhengda Medical Instruments looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for Beijing Chunlizhengda Medical Instruments 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com