Beijing Chunlizhengda Medical Instruments Co., Ltd. (HKG:1858) stock is about to trade ex-dividend in 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Beijing Chunlizhengda Medical Instruments' shares on or after the 17th of October, you won't be eligible to receive the dividend, when it is paid on the 1st of January.
The company's next dividend payment will be CN¥0.083 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 2.1% on the current share price of HK$8.70. 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! We need to see whether the dividend is covered by earnings and if it's growing.
Check out 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 74% 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. It distributed 27% 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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Beijing Chunlizhengda Medical Instruments's earnings per share have been growing at 15% 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. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of 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. Since the start of our data, nine years ago, Beijing Chunlizhengda Medical Instruments has lifted its dividend by approximately 28% 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.
The Bottom Line
Should investors buy Beijing Chunlizhengda Medical Instruments for the upcoming dividend? 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. Overall we think this is an attractive combination and worthy of further research.
Wondering what the future holds for Beijing Chunlizhengda Medical Instruments? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.