China National Electric Apparatus Research Institute Co., Ltd. (SHSE:688128) Passed Our Checks, And It's About To Pay A CN¥0.45 Dividend

It looks like China National Electric Apparatus Research Institute Co., Ltd. (SHSE:688128) is about to go ex-dividend in the next 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase China National Electric Apparatus Research Institute's shares before the 20th of June in order to be eligible for the dividend, which will be paid on the 20th of June.

The company's upcoming dividend is CN¥0.45 a share, following on from the last 12 months, when the company distributed a total of CN¥0.45 per share to shareholders. Based on the last year's worth of payments, China National Electric Apparatus Research Institute stock has a trailing yield of around 2.4% on the current share price of CN¥18.77. If you buy this business for its dividend, you should have an idea of whether China National Electric Apparatus Research Institute's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for China National Electric Apparatus Research Institute

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. Fortunately China National Electric Apparatus Research Institute's payout ratio is modest, at just 44% of profit. 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. Over the last year, it paid out more than three-quarters (81%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that China National Electric Apparatus Research Institute's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit China National Electric Apparatus Research Institute 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, China National Electric Apparatus Research Institute's earnings per share have been growing at 12% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. China National Electric Apparatus Research Institute has delivered an average of 11% per year annual increase in its dividend, based on the past four years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is China National Electric Apparatus Research Institute worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, China National Electric Apparatus Research Institute paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

So while China National Electric Apparatus Research Institute looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for China National Electric Apparatus Research Institute and you should be aware of this before buying any shares.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com