Income Investors Should Know That Wenzhou Kangning Hospital Co., Ltd. (HKG:2120) Goes Ex-Dividend Soon

Wenzhou Kangning Hospital Co., Ltd. (HKG:2120) is about to trade ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. Thus, you can purchase Wenzhou Kangning Hospital's shares before the 8th of September in order to receive the dividend, which the company will pay on the 5th of October.

The company's next dividend payment will be CN¥0.18 per share. Last year, in total, the company distributed CN¥0.50 to shareholders. Based on the last year's worth of payments, Wenzhou Kangning Hospital stock has a trailing yield of around 5.8% on the current share price of HK$10.00. If you buy this business for its dividend, you should have an idea of whether Wenzhou Kangning Hospital's dividend is reliable and sustainable. As a result, readers should always check whether Wenzhou Kangning Hospital has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Wenzhou Kangning Hospital paid out more than half (69%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Wenzhou Kangning Hospital generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 44% of the free cash flow it generated, which is a comfortable payout ratio.

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.

Check out our latest analysis for Wenzhou Kangning Hospital

Click here to see how much of its profit Wenzhou Kangning Hospital paid out over the last 12 months.

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. It's not encouraging to see that Wenzhou Kangning Hospital's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Wenzhou Kangning Hospital has delivered 7.2% dividend growth per year on average over the past 10 years.

The Bottom Line

Should investors buy Wenzhou Kangning Hospital for the upcoming dividend? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. To summarise, Wenzhou Kangning Hospital looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you're not too concerned about Wenzhou Kangning Hospital's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 4 warning signs for Wenzhou Kangning Hospital and you should be aware of them before buying any shares.

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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.