Guangzhou Restaurant Group Company Limited (SHSE:603043) Passed Our Checks, And It's About To Pay A CN¥0.48 Dividend

Guangzhou Restaurant Group Company Limited (SHSE:603043) stock is about to trade ex-dividend in 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Guangzhou Restaurant Group investors that purchase the stock on or after the 30th of May will not receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be CN¥0.48 per share, on the back of last year when the company paid a total of CN¥0.48 to shareholders. Looking at the last 12 months of distributions, Guangzhou Restaurant Group has a trailing yield of approximately 2.7% on its current stock price of CN¥17.89. 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 Guangzhou Restaurant Group can afford its dividend, and if the dividend could grow.

View our latest analysis for Guangzhou Restaurant Group

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. That's why it's good to see Guangzhou Restaurant Group paying out a modest 49% of its earnings. 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. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Guangzhou Restaurant Group earnings per share are up 7.4% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Guangzhou Restaurant Group has delivered 11% dividend growth per year on average over the past six years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Is Guangzhou Restaurant Group worth buying for its dividend? Earnings per share have been growing moderately, and Guangzhou Restaurant Group is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Guangzhou Restaurant Group is being conservative with its dividend payouts and could still perform reasonably over the long run. Guangzhou Restaurant Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Guangzhou Restaurant Group is facing. Case in point: We've spotted 1 warning sign for Guangzhou Restaurant Group you should be aware of.

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.