Be Sure To Check Out Shanghai Research Institute of Building Sciences Group Co., Ltd. (SHSE:603153) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shanghai Research Institute of Building Sciences Group Co., Ltd. (SHSE:603153) is about to trade ex-dividend in the next 2 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. In other words, investors can purchase Shanghai Research Institute of Building Sciences Group's shares before the 14th of June in order to be eligible for the dividend, which will be paid on the 14th of June.

The company's next dividend payment will be CN¥0.24 per share. Last year, in total, the company distributed CN¥0.24 to shareholders. Last year's total dividend payments show that Shanghai Research Institute of Building Sciences Group has a trailing yield of 1.4% on the current share price of CN¥17.32. 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 Shanghai Research Institute of Building Sciences Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Shanghai Research Institute of Building Sciences 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. That's why it's good to see Shanghai Research Institute of Building Sciences Group paying out a modest 28% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 40% 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 Shanghai Research Institute of Building Sciences Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Shanghai Research Institute of Building Sciences Group's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Unfortunately Shanghai Research Institute of Building Sciences Group has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Is Shanghai Research Institute of Building Sciences Group an attractive dividend stock, or better left on the shelf? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Shanghai Research Institute of Building Sciences Group is halfway there. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Shanghai Research Institute of Building Sciences Group is facing. Every company has risks, and we've spotted 1 warning sign for Shanghai Research Institute of Building Sciences Group you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.