Changzheng Engineering Technology Co.,Ltd (SHSE:603698) Will Pay A CN¥0.105 Dividend In Three Days

Changzheng Engineering Technology Co.,Ltd (SHSE:603698) is about to trade ex-dividend in the next 3 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Changzheng Engineering TechnologyLtd's shares on or after the 5th of July will not receive the dividend, which will be paid on the 5th of July.

The company's next dividend payment will be CN¥0.105 per share. Last year, in total, the company distributed CN¥0.10 to shareholders. Based on the last year's worth of payments, Changzheng Engineering TechnologyLtd has a trailing yield of 0.9% on the current stock price of CN¥12.02. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Changzheng Engineering TechnologyLtd

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. Changzheng Engineering TechnologyLtd paid out a comfortable 35% of its profit last year. 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. Over the last year, it paid out more than three-quarters (87%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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 Changzheng Engineering TechnologyLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Changzheng Engineering TechnologyLtd's 5.8% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, nine years ago, Changzheng Engineering TechnologyLtd has lifted its dividend by approximately 9.0% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Changzheng Engineering TechnologyLtd? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. All things considered, we are not particularly enthused about Changzheng Engineering TechnologyLtd from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Changzheng Engineering TechnologyLtd, you should know about the other risks facing this business. Case in point: We've spotted 2 warning signs for Changzheng Engineering TechnologyLtd 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com