Here's What We Like About Sinotruk Jinan TruckLtd's (SZSE:000951) Upcoming Dividend

It looks like Sinotruk Jinan Truck Co.,Ltd (SZSE:000951) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Accordingly, Sinotruk Jinan TruckLtd investors that purchase the stock on or after the 28th of May will not receive the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be CN¥0.462 per share, and in the last 12 months, the company paid a total of CN¥0.46 per share. Based on the last year's worth of payments, Sinotruk Jinan TruckLtd has a trailing yield of 2.9% on the current stock price of CN¥15.78. 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 check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Sinotruk Jinan TruckLtd

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 Sinotruk Jinan TruckLtd paying out a modest 48% 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. The good news is it paid out just 3.1% of its free cash flow in the last 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 the company's payout ratio, plus analyst estimates of its future dividends.

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. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Sinotruk Jinan TruckLtd'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 growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sinotruk Jinan TruckLtd has delivered 14% dividend growth per year on average over the past 10 years.

To Sum It Up

Is Sinotruk Jinan TruckLtd an attractive dividend stock, or better left on the shelf? Earnings per share have been flat over this time, but we're intrigued to see that Sinotruk Jinan TruckLtd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. 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 Sinotruk Jinan TruckLtd is halfway there. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Sinotruk Jinan TruckLtd 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 Sinotruk Jinan TruckLtd you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.