Here's What We Like About Gongniu GroupLtd's (SHSE:603195) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Gongniu Group Co.,Ltd. (SHSE:603195) is about to trade ex-dividend in the next two 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Gongniu GroupLtd's shares before the 6th of June to receive the dividend, which will be paid on the 6th of June.

The company's next dividend payment will be CN¥3.10 per share, and in the last 12 months, the company paid a total of CN¥3.10 per share. Calculating the last year's worth of payments shows that Gongniu GroupLtd has a trailing yield of 2.5% on the current share price of CN¥122.97. 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 Gongniu GroupLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for Gongniu GroupLtd

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. Gongniu GroupLtd is paying out an acceptable 68% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 48% of the free cash flow it generated, which is a comfortable payout ratio.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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 earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Gongniu GroupLtd's earnings per share have risen 17% per annum over the last five years. Gongniu GroupLtd is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Gongniu GroupLtd has delivered 4.8% dividend growth per year on average over the past four years. Earnings per share have been growing much quicker than dividends, potentially because Gongniu GroupLtd is keeping back more of its profits to grow the business.

To Sum It Up

From a dividend perspective, should investors buy or avoid Gongniu GroupLtd? We like Gongniu GroupLtd's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Gongniu GroupLtd for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Gongniu GroupLtd and you should be aware of this before buying any shares.

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.