Inventronics (Hangzhou), Inc. (SZSE:300582) stock is about to trade ex-dividend in 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Inventronics (Hangzhou)'s shares on or after the 5th of May will not receive the dividend, which will be paid on the 5th of May.

The company's next dividend payment will be CN¥0.079 per share, and in the last 12 months, the company paid a total of CN¥0.079 per share. Based on the last year's worth of payments, Inventronics (Hangzhou) stock has a trailing yield of around 0.7% on the current share price of CN¥12. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Inventronics (Hangzhou)

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Inventronics (Hangzhou) has a low and conservative payout ratio of just 14% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 60% of its free cash flow as dividends, within the usual range for most companies.

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 Inventronics (Hangzhou) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Inventronics (Hangzhou)'s earnings per share have risen 15% per annum over the last five years. Inventronics (Hangzhou) 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last five years, Inventronics (Hangzhou) has lifted its dividend by approximately 10% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Inventronics (Hangzhou) got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Inventronics (Hangzhou) paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Inventronics (Hangzhou), and we would prioritise taking a closer look at it.

While it's tempting to invest in Inventronics (Hangzhou) for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Inventronics (Hangzhou) that you should be aware of before investing in their 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.