Income Investors Should Know That Tangshan Sanyou Chemical Industries Co.,Ltd (SHSE:600409) Goes Ex-Dividend Soon

Readers hoping to buy Tangshan Sanyou Chemical Industries Co.,Ltd (SHSE:600409) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Thus, you can purchase Tangshan Sanyou Chemical IndustriesLtd's shares before the 24th of June in order to receive the dividend, which the company will pay on the 24th of June.

The company's next dividend payment will be CN¥0.083 per share, and in the last 12 months, the company paid a total of CN¥0.083 per share. Based on the last year's worth of payments, Tangshan Sanyou Chemical IndustriesLtd has a trailing yield of 1.6% on the current stock price of CN¥5.27. If you buy this business for its dividend, you should have an idea of whether Tangshan Sanyou Chemical IndustriesLtd's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Tangshan Sanyou Chemical IndustriesLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tangshan Sanyou Chemical IndustriesLtd is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Thankfully its dividend payments took up just 44% of the free cash flow it generated, which is a comfortable payout ratio.

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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Tangshan Sanyou Chemical IndustriesLtd's earnings per share have fallen at approximately 14% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tangshan Sanyou Chemical IndustriesLtd's dividend payments are effectively flat on where they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Final Takeaway

Is Tangshan Sanyou Chemical IndustriesLtd an attractive dividend stock, or better left on the shelf? Tangshan Sanyou Chemical IndustriesLtd has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, while it has some positive characteristics, we're not inclined to race out and buy Tangshan Sanyou Chemical IndustriesLtd today.

In light of that, while Tangshan Sanyou Chemical IndustriesLtd has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Tangshan Sanyou Chemical IndustriesLtd 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.

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