NORINCO International Cooperation Ltd. (SZSE:000065) Will Pay A CN¥0.091976 Dividend In Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see NORINCO International Cooperation Ltd. (SZSE:000065) is about to trade ex-dividend in the next 3 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 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. Accordingly, NORINCO International Cooperation investors that purchase the stock on or after the 21st of June will not receive the dividend, which will be paid on the 21st of June.

The company's upcoming dividend is CN¥0.091976 a share, following on from the last 12 months, when the company distributed a total of CN¥0.092 per share to shareholders. Looking at the last 12 months of distributions, NORINCO International Cooperation has a trailing yield of approximately 0.8% on its current stock price of CN¥11.00. If you buy this business for its dividend, you should have an idea of whether NORINCO International Cooperation's dividend is reliable and sustainable. So we need to investigate whether NORINCO International Cooperation can afford its dividend, and if the dividend could grow.

Check out our latest analysis for NORINCO International Cooperation

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. NORINCO International Cooperation has a low and conservative payout ratio of just 9.3% of its income after tax. 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. Over the past year it paid out 166% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While NORINCO International Cooperation's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to NORINCO International Cooperation's ability to maintain its dividend.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at NORINCO International Cooperation, with earnings per share up 5.1% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, NORINCO International Cooperation has increased its dividend at approximately 18% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid NORINCO International Cooperation? NORINCO International Cooperation has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. All things considered, we are not particularly enthused about NORINCO International Cooperation from a dividend perspective.

If you want to look further into NORINCO International Cooperation, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 1 warning sign with NORINCO International Cooperation and understanding them should be part of your investment process.

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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