China Northern Rare Earth (Group) High-Tech Co.,Ltd (SHSE:600111) Pays A CN¥0.07 Dividend In Just Three Days

Readers hoping to buy China Northern Rare Earth (Group) High-Tech Co.,Ltd (SHSE:600111) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, China Northern Rare Earth (Group) High-TechLtd investors that purchase the stock on or after the 21st of June will not receive the dividend, which will be paid on the 21st of June.

The company's next dividend payment will be CN¥0.07 per share. Last year, in total, the company distributed CN¥0.07 to shareholders. Based on the last year's worth of payments, China Northern Rare Earth (Group) High-TechLtd stock has a trailing yield of around 0.4% on the current share price of CN¥17.87. If you buy this business for its dividend, you should have an idea of whether China Northern Rare Earth (Group) High-TechLtd's dividend is reliable and sustainable. As a result, readers should always check whether China Northern Rare Earth (Group) High-TechLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for China Northern Rare Earth (Group) High-TechLtd

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. China Northern Rare Earth (Group) High-TechLtd paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether China Northern Rare Earth (Group) High-TechLtd generated enough free cash flow to afford its dividend. China Northern Rare Earth (Group) High-TechLtd paid out more free cash flow than it generated - 129%, to be precise - last year, which we think is concerningly 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.

While China Northern Rare Earth (Group) High-TechLtd's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to China Northern Rare Earth (Group) High-TechLtd's ability to maintain its dividend.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 China Northern Rare Earth (Group) High-TechLtd has grown its earnings rapidly, up 21% a year for the past five years. Earnings have been growing quickly, 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. China Northern Rare Earth (Group) High-TechLtd's dividend payments per share have declined at 6.2% per year on average over the past 10 years, which is uninspiring. China Northern Rare Earth (Group) High-TechLtd is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is China Northern Rare Earth (Group) High-TechLtd worth buying for its dividend? We like that China Northern Rare Earth (Group) High-TechLtd has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of China Northern Rare Earth (Group) High-TechLtd's dividend merits.

So while China Northern Rare Earth (Group) High-TechLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for China Northern Rare Earth (Group) High-TechLtd you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.

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