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 Beijing Roborock Technology Co., Ltd. (SHSE:688169) is about to go ex-dividend in just two 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 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. Meaning, you will need to purchase Beijing Roborock Technology's shares before the 20th of July to receive the dividend, which will be paid on the 20th of July.
The company's next dividend payment will be CN¥1.27 per share. Last year, in total, the company distributed CN¥1.27 to shareholders. Based on the last year's worth of payments, Beijing Roborock Technology stock has a trailing yield of around 0.4% on the current share price of CN¥351.76. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Beijing Roborock Technology
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Beijing Roborock Technology paid out just 11% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 17% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Beijing Roborock Technology'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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Beijing Roborock Technology's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Beijing Roborock Technology has seen its dividend decline 3.8% per annum on average over the past three years, which is not great to see.
To Sum It Up
From a dividend perspective, should investors buy or avoid Beijing Roborock Technology? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
On that note, you'll want to research what risks Beijing Roborock Technology is facing. Case in point: We've spotted 1 warning sign for Beijing Roborock Technology you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.