Read This Before Considering China Shipbuilding Industry Group Power Co., Ltd. (SHSE:600482) For Its Upcoming CN¥0.03138 Dividend

China Shipbuilding Industry Group Power Co., Ltd. (SHSE:600482) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day 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. 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. Therefore, if you purchase China Shipbuilding Industry Group Power's shares on or after the 22nd of November, you won't be eligible to receive the dividend, when it is paid on the 22nd of November.

The company's next dividend payment will be CN¥0.03138 per share, on the back of last year when the company paid a total of CN¥0.11 to shareholders. Based on the last year's worth of payments, China Shipbuilding Industry Group Power stock has a trailing yield of around 0.5% on the current share price of CN¥23.19. 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 investigate whether China Shipbuilding Industry Group Power can afford its dividend, and if the dividend could grow.

Check out our latest analysis for China Shipbuilding Industry Group Power

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. China Shipbuilding Industry Group Power has a low and conservative payout ratio of just 21% of its income after tax. 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. The good news is it paid out just 5.2% of its free cash flow in the last year.

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 China Shipbuilding Industry Group Power paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by China Shipbuilding Industry Group Power's 8.5% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, China Shipbuilding Industry Group Power has lifted its dividend by approximately 4.9% a year on average.

The Bottom Line

Is China Shipbuilding Industry Group Power an attractive dividend stock, or better left on the shelf? China Shipbuilding Industry Group Power has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it's hard to get excited about China Shipbuilding Industry Group Power from a dividend perspective.

Keen to explore more data on China Shipbuilding Industry Group Power's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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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.