Xinhua Winshare Publishing and Media Co., Ltd. (HKG:811) is about to trade ex-dividend in the next two days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Xinhua Winshare Publishing and Media's shares on or after the 26th of October will not receive the dividend, which will be paid on the 22nd of December.

The company's upcoming dividend is CN¥0.17 a share, following on from the last 12 months, when the company distributed a total of CN¥0.61 per share to shareholders. Calculating the last year's worth of payments shows that Xinhua Winshare Publishing and Media has a trailing yield of 8.9% on the current share price of HK$8.02. 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.

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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. Xinhua Winshare Publishing and Media paid out 53% of its earnings to investors last year, a normal payout level for most businesses. 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 73% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Xinhua Winshare Publishing and Media'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.

Check out our latest analysis for Xinhua Winshare Publishing and Media

Click here to see how much of its profit Xinhua Winshare Publishing and Media 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 earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Xinhua Winshare Publishing and Media'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. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Xinhua Winshare Publishing and Media's dividend payments are effectively flat on where they were 10 years ago.

The Bottom Line

Is Xinhua Winshare Publishing and Media worth buying for its dividend? Earnings per share have barely grown, and although Xinhua Winshare Publishing and Media paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

However if you're still interested in Xinhua Winshare Publishing and Media as a potential investment, you should definitely consider some of the risks involved with Xinhua Winshare Publishing and Media. For example - Xinhua Winshare Publishing and Media has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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Disclaimer:This article represents the opinion of the author only. It does not represent the opinion of Webull, nor should it be viewed as an indication that Webull either agrees with or confirms the truthfulness or accuracy of the information. It should not be considered as investment advice from Webull or anyone else, nor should it be used as the basis of any investment decision.