Just Four Days Till Shanghai Haohai Biological Technology Co., Ltd. (HKG:6826) Will Be Trading Ex-Dividend

It looks like Shanghai Haohai Biological Technology Co., Ltd. (HKG:6826) is about to go ex-dividend in the next four days. The ex-dividend date is commonly two business days 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. 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, Shanghai Haohai Biological Technology investors that purchase the stock on or after the 17th of June will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be CN¥0.60 per share, on the back of last year when the company paid a total of CN¥1.20 to shareholders. Looking at the last 12 months of distributions, Shanghai Haohai Biological Technology has a trailing yield of approximately 4.9% on its current stock price of HK$26.85. 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.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Shanghai Haohai Biological Technology is paying out an acceptable 56% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Shanghai Haohai Biological Technology generated enough free cash flow to afford its dividend. Over the last year it paid out 67% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Shanghai Haohai Biological 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.

View our latest analysis for Shanghai Haohai Biological Technology

Click here to see how much of its profit Shanghai Haohai Biological Technology paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Shanghai Haohai Biological Technology, with earnings per share up 9.3% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past nine years, Shanghai Haohai Biological Technology has increased its dividend at approximately 22% 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.

Final Takeaway

From a dividend perspective, should investors buy or avoid Shanghai Haohai Biological Technology? Earnings per share have been growing modestly and Shanghai Haohai Biological Technology paid out a bit over half of its earnings and free cash flow last year. All things considered, we are not particularly enthused about Shanghai Haohai Biological Technology from a dividend perspective.

However if you're still interested in Shanghai Haohai Biological Technology as a potential investment, you should definitely consider some of the risks involved with Shanghai Haohai Biological Technology. Our analysis shows 1 warning sign for Shanghai Haohai Biological Technology and you should be aware of it before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.