Shanghai Chuangli Group Co., Ltd. (SHSE:603012) Looks Interesting, And It's About To Pay A Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Shanghai Chuangli Group Co., Ltd. (SHSE:603012) is about to go ex-dividend in just 2 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Meaning, you will need to purchase Shanghai Chuangli Group's shares before the 30th of May to receive the dividend, which will be paid on the 30th of May.

The company's upcoming dividend is CN¥0.15 a share, following on from the last 12 months, when the company distributed a total of CN¥0.15 per share to shareholders. Last year's total dividend payments show that Shanghai Chuangli Group has a trailing yield of 2.8% on the current share price of CN¥5.33. If you buy this business for its dividend, you should have an idea of whether Shanghai Chuangli Group's dividend is reliable and sustainable. As a result, readers should always check whether Shanghai Chuangli Group has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Shanghai Chuangli Group

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. Shanghai Chuangli Group is paying out just 24% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It distributed 44% of its free cash flow as dividends, a comfortable payout level for most companies.

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 Shanghai Chuangli Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Shanghai Chuangli Group's earnings per share have risen 11% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, nine years ago, Shanghai Chuangli Group has lifted its dividend by approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy Shanghai Chuangli Group for the upcoming dividend? Shanghai Chuangli Group has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Shanghai Chuangli Group, and we would prioritise taking a closer look at it.

While it's tempting to invest in Shanghai Chuangli Group for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Shanghai Chuangli Group 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.