Only Three Days Left To Cash In On Shanghai Kindly Enterprise Development GroupLTD's (SHSE:603987) Dividend

Shanghai Kindly Enterprise Development Group Co.,LTD. (SHSE:603987) is about to trade ex-dividend in the next 3 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. 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 Shanghai Kindly Enterprise Development GroupLTD's shares before the 14th of June to receive the dividend, which will be paid on the 14th of June.

The company's next dividend payment will be CN¥0.16 per share, and in the last 12 months, the company paid a total of CN¥0.16 per share. Looking at the last 12 months of distributions, Shanghai Kindly Enterprise Development GroupLTD has a trailing yield of approximately 2.4% on its current stock price of CN¥6.67. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Shanghai Kindly Enterprise Development GroupLTD

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. That's why it's good to see Shanghai Kindly Enterprise Development GroupLTD paying out a modest 33% of its earnings. 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 past year it paid out 125% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Shanghai Kindly Enterprise Development GroupLTD paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Shanghai Kindly Enterprise Development GroupLTD to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Shanghai Kindly Enterprise Development GroupLTD paid out over the last 12 months.

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. This is why it's a relief to see Shanghai Kindly Enterprise Development GroupLTD earnings per share are up 7.4% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Shanghai Kindly Enterprise Development GroupLTD has delivered an average of 12% per year annual increase in its dividend, based on the past seven years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Is Shanghai Kindly Enterprise Development GroupLTD an attractive dividend stock, or better left on the shelf? Shanghai Kindly Enterprise Development GroupLTD has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. All things considered, we are not particularly enthused about Shanghai Kindly Enterprise Development GroupLTD from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Shanghai Kindly Enterprise Development GroupLTD, you should know about the other risks facing this business. To help with this, we've discovered 1 warning sign for Shanghai Kindly Enterprise Development GroupLTD that you should be aware of before investing in their shares.

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.