Hubei Forbon Technology Co.,Ltd. (SZSE:300387) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase Hubei Forbon TechnologyLtd's shares on or after the 31st of May will not receive the dividend, which will be paid on the 31st of May.
The company's next dividend payment will be CN¥0.05 per share, on the back of last year when the company paid a total of CN¥0.05 to shareholders. Looking at the last 12 months of distributions, Hubei Forbon TechnologyLtd has a trailing yield of approximately 0.7% on its current stock price of CN¥7.46. If you buy this business for its dividend, you should have an idea of whether Hubei Forbon TechnologyLtd's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Hubei Forbon TechnologyLtd
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Hubei Forbon TechnologyLtd paying out a modest 47% of its earnings. 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 41% of its free cash flow in the past year.
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.SZSE:300387 Historic Dividend May 27th 2022
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Hubei Forbon TechnologyLtd's earnings per share have dropped 23% a year over 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. In the past seven years, Hubei Forbon TechnologyLtd has increased its dividend at approximately 2.6% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid Hubei Forbon TechnologyLtd? Hubei Forbon TechnologyLtd has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it's hard to get excited about Hubei Forbon TechnologyLtd from a dividend perspective.
In light of that, while Hubei Forbon TechnologyLtd has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 4 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.
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.