Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shandong Weigao Group Medical Polymer Company Limited (HKG:1066) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Thus, you can purchase Shandong Weigao Group Medical Polymer's shares before the 19th of October in order to receive the dividend, which the company will pay on the 24th of November.
The company's next dividend payment will be CN¥0.073 per share. Last year, in total, the company distributed CN¥0.17 to shareholders. Last year's total dividend payments show that Shandong Weigao Group Medical Polymer has a trailing yield of 2.4% on the current share price of HK$6.69. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Shandong Weigao Group Medical Polymer has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Shandong Weigao Group Medical Polymer
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shandong Weigao Group Medical Polymer paid out a comfortable 29% of its profit last year. A useful secondary check can be to evaluate whether Shandong Weigao Group Medical Polymer generated enough free cash flow to afford its dividend. Dividends consumed 68% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Shandong Weigao Group Medical Polymer's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Shandong Weigao Group Medical Polymer's earnings per share have risen 13% per annum over the last five years. Shandong Weigao Group Medical Polymer has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some 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. In the last 10 years, Shandong Weigao Group Medical Polymer has lifted its dividend by approximately 8.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Shandong Weigao Group Medical Polymer worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Shandong Weigao Group Medical Polymer paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
Wondering what the future holds for Shandong Weigao Group Medical Polymer? See what the 10 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.