Hubei Donper Electromechanical Group Co., Ltd. (SHSE:601956) Stock Goes Ex-Dividend In Just Two Days

It looks like Hubei Donper Electromechanical Group Co., Ltd. (SHSE:601956) is about to go ex-dividend in the next two 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 Hubei Donper Electromechanical Group's shares before the 14th of June to receive the dividend, which will be paid on the 14th of June.

The company's next dividend payment will be CN¥0.20 per share, and in the last 12 months, the company paid a total of CN¥0.20 per share. Based on the last year's worth of payments, Hubei Donper Electromechanical Group stock has a trailing yield of around 4.1% on the current share price of CN¥4.90. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Hubei Donper Electromechanical Group can afford its dividend, and if the dividend could grow.

View our latest analysis for Hubei Donper Electromechanical Group

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. Hubei Donper Electromechanical Group paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Hubei Donper Electromechanical Group generated enough free cash flow to afford its dividend. Fortunately, it paid out only 47% of its free cash flow in the past 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 Hubei Donper Electromechanical Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Hubei Donper Electromechanical Group's earnings are down 4.6% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hubei Donper Electromechanical Group has delivered an average of 26% per year annual increase in its dividend, based on the past three years of dividend payments. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

To Sum It Up

Has Hubei Donper Electromechanical Group got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. 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.

So if you want to do more digging on Hubei Donper Electromechanical Group, you'll find it worthwhile knowing the risks that this stock faces. In terms of investment risks, we've identified 2 warning signs with Hubei Donper Electromechanical Group and understanding them should be part of your investment process.

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.