Income Investors Should Know That Cheng De Lolo Company Limited (SZSE:000848) Goes Ex-Dividend Soon

It looks like Cheng De Lolo Company Limited (SZSE:000848) is about to go ex-dividend in the next 2 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Cheng De Lolo's shares before the 30th of May in order to be eligible for the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be CN¥0.40 per share. Last year, in total, the company distributed CN¥0.40 to shareholders. Calculating the last year's worth of payments shows that Cheng De Lolo has a trailing yield of 4.3% on the current share price of CN¥9.24. 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 Cheng De Lolo has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Cheng De Lolo

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Cheng De Lolo is paying out an acceptable 64% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (74%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Cheng De Lolo'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. Fortunately for readers, Cheng De Lolo's earnings per share have been growing at 10% a year for the past five years. Cheng De Lolo is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Cheng De Lolo has lifted its dividend by approximately 14% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Cheng De Lolo an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Cheng De Lolo's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 64% and 74% respectively. Overall, it's hard to get excited about Cheng De Lolo from a dividend perspective.

On that note, you'll want to research what risks Cheng De Lolo is facing. For example, we've found 2 warning signs for Cheng De Lolo that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.