Sany Heavy Industry Co.,Ltd (SHSE:600031) Is About To Go Ex-Dividend, And It Pays A 1.4% Yield

Sany Heavy Industry Co.,Ltd (SHSE:600031) stock is about to trade ex-dividend in 3 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Sany Heavy IndustryLtd investors that purchase the stock on or after the 21st of June will not receive the dividend, which will be paid on the 21st of June.

The company's upcoming dividend is CN¥0.22 a share, following on from the last 12 months, when the company distributed a total of CN¥0.22 per share to shareholders. Looking at the last 12 months of distributions, Sany Heavy IndustryLtd has a trailing yield of approximately 1.4% on its current stock price of CN¥15.64. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Sany Heavy IndustryLtd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Sany Heavy IndustryLtd paid out a comfortable 41% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 36% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Sany Heavy IndustryLtd'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?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Sany Heavy IndustryLtd's earnings per share have fallen at approximately 7.2% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sany Heavy IndustryLtd has seen its dividend decline 1.3% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Should investors buy Sany Heavy IndustryLtd for the upcoming dividend? Earnings per share are down meaningfully, 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 needs to be cut. 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.

On that note, you'll want to research what risks Sany Heavy IndustryLtd is facing. Every company has risks, and we've spotted 1 warning sign for Sany Heavy IndustryLtd you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com