Swancor Advanced Materials Co., Ltd. (SHSE:688585) is about to trade ex-dividend in the next couple of days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Swancor Advanced Materials' shares on or after the 23rd of May will not receive the dividend, which will be paid on the 23rd of May.

The company's next dividend payment will be CN¥0.022 per share, and in the last 12 months, the company paid a total of CN¥0.022 per share. Based on the last year's worth of payments, Swancor Advanced Materials stock has a trailing yield of around 0.3% on the current share price of CN¥8.38. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Swancor Advanced Materials

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Swancor Advanced Materials paid out just 11% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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.

Click here to see how much of its profit Swancor Advanced Materials 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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Swancor Advanced Materials, with earnings per share up 7.4% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Swancor Advanced Materials has seen its dividend decline 48% per annum on average over the past two years, which is not great to see. Swancor Advanced Materials is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Is Swancor Advanced Materials worth buying for its dividend? Swancor Advanced Materials delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and -2.4% of its cash flow over the last year, which is a mediocre outcome. In summary, while it has some positive characteristics, we're not inclined to race out and buy Swancor Advanced Materials today.

Want to learn more about Swancor Advanced Materials? Here's a visualisation of its historical rate of revenue and earnings growth.

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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.