Beijing Jingneng Thermal Co., Ltd. (SZSE:002893) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Beijing Jingneng Thermal Co., Ltd. (SZSE:002893) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. 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. This means that investors who purchase Beijing Jingneng Thermal's shares on or after the 20th of June will not receive the dividend, which will be paid on the 20th of June.

The company's next dividend payment will be CN¥0.08 per share, and in the last 12 months, the company paid a total of CN¥0.08 per share. Calculating the last year's worth of payments shows that Beijing Jingneng Thermal has a trailing yield of 0.8% on the current share price of CN¥10.17. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Beijing Jingneng Thermal

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 Beijing Jingneng Thermal's payout ratio is modest, at just 30% of profit. A useful secondary check can be to evaluate whether Beijing Jingneng Thermal generated enough free cash flow to afford its dividend. Luckily it paid out just 17% of its free cash flow 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 how much of its profit Beijing Jingneng Thermal 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. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Beijing Jingneng Thermal's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings per share growth in recent times has not been a standout. 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.

Beijing Jingneng Thermal also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Beijing Jingneng Thermal has delivered 5.1% dividend growth per year on average over the past six years.

The Bottom Line

Is Beijing Jingneng Thermal 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 Beijing Jingneng Thermal 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 Beijing Jingneng Thermal is halfway there. There's a lot to like about Beijing Jingneng Thermal, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 4 warning signs for Beijing Jingneng Thermal that we strongly recommend you have a look at before investing in the company.

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.

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