Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Guangdong Champion Asia Electronics Co.,Ltd. (SHSE:603386) is about to trade ex-dividend in the next 2 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. Meaning, you will need to purchase Guangdong Champion Asia ElectronicsLtd's shares before the 7th of July to receive the dividend, which will be paid on the 7th of July.

The company's next dividend payment will be CN¥0.40 per share. Last year, in total, the company distributed CN¥0.40 to shareholders. Based on the last year's worth of payments, Guangdong Champion Asia ElectronicsLtd stock has a trailing yield of around 2.4% on the current share price of CN¥16.75. If you buy this business for its dividend, you should have an idea of whether Guangdong Champion Asia ElectronicsLtd's dividend is reliable and sustainable. So we need to investigate whether Guangdong Champion Asia ElectronicsLtd can afford its dividend, and if the dividend could grow.

See our latest analysis for Guangdong Champion Asia ElectronicsLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Guangdong Champion Asia ElectronicsLtd paid out 51% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the past year it paid out 134% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While Guangdong Champion Asia ElectronicsLtd's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Guangdong Champion Asia ElectronicsLtd's ability to maintain its dividend.

Click here to see how much of its profit Guangdong Champion Asia ElectronicsLtd paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Guangdong Champion Asia ElectronicsLtd's earnings per share have risen 14% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last four years, Guangdong Champion Asia ElectronicsLtd 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

Is Guangdong Champion Asia ElectronicsLtd an attractive dividend stock, or better left on the shelf? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 134% of its cashflow, which is uncomfortably high. In summary, while it has some positive characteristics, we're not inclined to race out and buy Guangdong Champion Asia ElectronicsLtd today.

If you want to look further into Guangdong Champion Asia ElectronicsLtd, it's worth knowing the risks this business faces. Case in point: We've spotted 4 warning signs for Guangdong Champion Asia ElectronicsLtd you should be aware of.

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.