Is It Smart To Buy Shanghai Kaichuang Marine International Co., Ltd. (SHSE:600097) Before It Goes Ex-Dividend?

Shanghai Kaichuang Marine International Co., Ltd. (SHSE:600097) is about to trade ex-dividend in the next 2 days. 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. 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, Shanghai Kaichuang Marine International investors that purchase the stock on or after the 6th of June will not receive the dividend, which will be paid on the 6th of June.

The company's next dividend payment will be CN¥0.19 per share. Last year, in total, the company distributed CN¥0.19 to shareholders. Calculating the last year's worth of payments shows that Shanghai Kaichuang Marine International has a trailing yield of 2.1% on the current share price of CN¥8.95. 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! As a result, readers should always check whether Shanghai Kaichuang Marine International has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Shanghai Kaichuang Marine International

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. Shanghai Kaichuang Marine International paid out a comfortable 31% 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. Luckily it paid out just 9.1% 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 Shanghai Kaichuang Marine International paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Shanghai Kaichuang Marine International earnings per share are up 2.2% per annum over the last five years. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Shanghai Kaichuang Marine International has seen its dividend decline 0.5% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

Is Shanghai Kaichuang Marine International worth buying for its dividend? Earnings per share have been growing moderately, and Shanghai Kaichuang Marine International 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. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Shanghai Kaichuang Marine International is halfway there. Shanghai Kaichuang Marine International looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Shanghai Kaichuang Marine International looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 3 warning signs we've spotted with Shanghai Kaichuang Marine International (including 1 which is significant).

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.