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 Hubei Forbon Technology Co.,Ltd. (SZSE:300387) is about to go ex-dividend in just 4 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Hubei Forbon TechnologyLtd investors that purchase the stock on or after the 21st of June will not receive the dividend, which will be paid on the 21st of June.

The company's next dividend payment will be CN¥0.05 per share, and in the last 12 months, the company paid a total of CN¥0.05 per share. Based on the last year's worth of payments, Hubei Forbon TechnologyLtd stock has a trailing yield of around 0.7% on the current share price of CN¥7.08. If you buy this business for its dividend, you should have an idea of whether Hubei Forbon TechnologyLtd's dividend is reliable and sustainable. As a result, readers should always check whether Hubei Forbon TechnologyLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Hubei Forbon TechnologyLtd

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. Hubei Forbon TechnologyLtd is paying out just 24% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Hubei Forbon TechnologyLtd generated enough free cash flow to afford its dividend. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 how much of its profit Hubei Forbon TechnologyLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Hubei Forbon TechnologyLtd's 7.6% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hubei Forbon TechnologyLtd has delivered 2.3% dividend growth per year on average over the past eight years.

To Sum It Up

Should investors buy Hubei Forbon TechnologyLtd for the upcoming dividend? Earnings per share have fallen significantly, although at least Hubei Forbon TechnologyLtd paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. Overall, it's hard to get excited about Hubei Forbon TechnologyLtd from a dividend perspective.

If you want to look further into Hubei Forbon TechnologyLtd, it's worth knowing the risks this business faces. To help with this, we've discovered 2 warning signs for Hubei Forbon TechnologyLtd (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.

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.