Just Three Days Till Cofco Sugar Holding CO.,LTD. (SHSE:600737) Will Be Trading Ex-Dividend

It looks like Cofco Sugar Holding CO.,LTD. (SHSE:600737) is about to go ex-dividend in the next three 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. Therefore, if you purchase Cofco Sugar HoldingLTD's shares on or after the 30th of July, you won't be eligible to receive the dividend, when it is paid on the 30th of July.

The company's next dividend payment will be CN¥0.63 per share, on the back of last year when the company paid a total of CN¥0.87 to shareholders. Based on the last year's worth of payments, Cofco Sugar HoldingLTD has a trailing yield of 9.4% on the current stock price of CN¥9.27. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Cofco Sugar HoldingLTD has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Cofco Sugar HoldingLTD

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 83% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. 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. Dividends consumed 52% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Cofco Sugar HoldingLTD's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Cofco Sugar HoldingLTD has grown its earnings rapidly, up 34% a year for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Cofco Sugar HoldingLTD has delivered an average of 40% 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.

Final Takeaway

Should investors buy Cofco Sugar HoldingLTD for the upcoming dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Cofco Sugar HoldingLTD's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 83% and 52% respectively. In summary, it's hard to get excited about Cofco Sugar HoldingLTD from a dividend perspective.

In light of that, while Cofco Sugar HoldingLTD has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 2 warning signs with Cofco Sugar HoldingLTD (at least 1 which is a bit unpleasant), and understanding them should be part of your investment process.

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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.

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