Income Investors Should Know That Xinjiang Qingsong Building Materials and Chemicals(Group)Co,Ltd. (SHSE:600425) Goes Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Xinjiang Qingsong Building Materials and Chemicals(Group)Co,Ltd. (SHSE:600425) is about to go ex-dividend in just three 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's shares before the 17th of May in order to be eligible for the dividend, which will be paid on the 17th of May.

The company's next dividend payment will be CN¥0.10 per share, and in the last 12 months, the company paid a total of CN¥0.10 per share. Last year's total dividend payments show that Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd has a trailing yield of 2.7% on the current share price of CN¥3.69. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's payout ratio is modest, at just 36% of profit. A useful secondary check can be to evaluate whether Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd generated enough free cash flow to afford its dividend. Over the past year it paid out 153% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd'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?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings have been growing somewhat, 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. Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd has delivered 7.2% dividend growth per year on average over the past 10 years.

To Sum It Up

Is Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd an attractive dividend stock, or better left on the shelf? Earnings per share have barely grown in this time, and although Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd is paying out a low percentage of its profit, its dividend was not well covered by free cash flow. Only rarely do we find companies paying out a low percentage of their profits yet a high percentage of their cash flow, so we'd mark this as a concern. Overall, it's hard to get excited about Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd from a dividend perspective.

So if you want to do more digging on Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 1 warning sign for Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd 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.