Guodian Nanjing Automation Co., Ltd. (SHSE:600268) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Guodian Nanjing Automation Co., Ltd. (SHSE:600268) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Guodian Nanjing Automation's shares before the 28th of June to receive the dividend, which will be paid on the 28th of June.

The company's next dividend payment will be CN¥0.09 per share, and in the last 12 months, the company paid a total of CN¥0.09 per share. Looking at the last 12 months of distributions, Guodian Nanjing Automation has a trailing yield of approximately 1.3% on its current stock price of CN¥7.11. 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 Guodian Nanjing Automation

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. That's why it's good to see Guodian Nanjing Automation paying out a modest 33% of its earnings. A useful secondary check can be to evaluate whether Guodian Nanjing Automation generated enough free cash flow to afford its dividend. It paid out 6.0% of its free cash flow as dividends last year, which is conservatively low.

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 Guodian Nanjing Automation 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Guodian Nanjing Automation has grown its earnings rapidly, up 34% a year for the past five years. Guodian Nanjing Automation is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Guodian Nanjing Automation has lifted its dividend by approximately 0.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Is Guodian Nanjing Automation worth buying for its dividend? Guodian Nanjing Automation has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Guodian Nanjing Automation looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Guodian Nanjing Automation has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Guodian Nanjing Automation 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.

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