Just Three Days Till Shaanxi Coal Industry Company Limited (SHSE:601225) Will Be Trading Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shaanxi Coal Industry Company Limited (SHSE:601225) is about to trade ex-dividend in the next three 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. Meaning, you will need to purchase Shaanxi Coal Industry's shares before the 17th of January to receive the dividend, which will be paid on the 17th of January.

The company's next dividend payment will be CN¥0.103 per share, and in the last 12 months, the company paid a total of CN¥1.31 per share. Last year's total dividend payments show that Shaanxi Coal Industry has a trailing yield of 5.9% on the current share price of CN¥22.15. If you buy this business for its dividend, you should have an idea of whether Shaanxi Coal Industry's dividend is reliable and sustainable. As a result, readers should always check whether Shaanxi Coal Industry has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Shaanxi Coal Industry

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shaanxi Coal Industry paid out more than half (66%) of its earnings last year, which is a regular payout ratio for most companies. 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. It distributed 42% 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Shaanxi Coal Industry's earnings per share have been growing at 15% a year for the past five years. Shaanxi Coal Industry is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Shaanxi Coal Industry has delivered an average of 27% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Has Shaanxi Coal Industry got what it takes to maintain its dividend payments? We like Shaanxi Coal Industry's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Shaanxi Coal Industry is facing. Our analysis shows 1 warning sign for Shaanxi Coal Industry and you should be aware of this before buying any shares.

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.