Dividend Investors: Don't Be Too Quick To Buy CNPC Capital Company Limited (SZSE:000617) For Its Upcoming Dividend

CNPC Capital Company Limited (SZSE:000617) stock is about to trade ex-dividend in couple of days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase CNPC Capital's shares before the 8th of January in order to receive the dividend, which the company will pay on the 8th of January.

The company's upcoming dividend is CN¥0.06 a share, following on from the last 12 months, when the company distributed a total of CN¥0.12 per share to shareholders. Based on the last year's worth of payments, CNPC Capital stock has a trailing yield of around 1.8% on the current share price of CN¥6.52. If you buy this business for its dividend, you should have an idea of whether CNPC Capital's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for CNPC Capital

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. CNPC Capital paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit CNPC Capital paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. CNPC Capital's earnings per share have fallen at approximately 11% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. CNPC Capital's dividend payments per share have declined at 4.3% per year on average over the past seven years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Should investors buy CNPC Capital for the upcoming dividend? We're not overly enthused to see CNPC Capital's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that in mind though, if the poor dividend characteristics of CNPC Capital don't faze you, it's worth being mindful of the risks involved with this business. Our analysis shows 1 warning sign for CNPC Capital and you should be aware of this before buying any 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.