Don't Race Out To Buy Minmetals Capital Company Limited (SHSE:600390) Just Because It's Going Ex-Dividend

Readers hoping to buy Minmetals Capital Company Limited (SHSE:600390) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. In other words, investors can purchase Minmetals Capital's shares before the 11th of October in order to be eligible for the dividend, which will be paid on the 11th of October.

The company's next dividend payment will be CN¥0.038 per share, and in the last 12 months, the company paid a total of CN¥0.23 per share. Looking at the last 12 months of distributions, Minmetals Capital has a trailing yield of approximately 2.3% on its current stock price of CN¥6.67. 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! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Minmetals Capital

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. Minmetals Capital paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Minmetals Capital paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Minmetals Capital's earnings per share have fallen at approximately 6.3% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Minmetals Capital has seen its dividend decline 1.3% per annum on average over the past six years, which is not great to see.

To Sum It Up

Should investors buy Minmetals Capital for the upcoming dividend? We're not overly enthused to see Minmetals Capital's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. Minmetals Capital doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Minmetals Capital. For example - Minmetals Capital has 1 warning sign we think 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.