Read This Before Considering Huaibei Mining Holdings Co.,Ltd. (SHSE:600985) For Its Upcoming CN¥1.00 Dividend

Huaibei Mining Holdings Co.,Ltd. (SHSE:600985) is about to trade ex-dividend in the next 3 days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Huaibei Mining HoldingsLtd investors that purchase the stock on or after the 7th of June will not receive the dividend, which will be paid on the 7th of June.

The company's next dividend payment will be CN¥1.00 per share, and in the last 12 months, the company paid a total of CN¥1.00 per share. Based on the last year's worth of payments, Huaibei Mining HoldingsLtd stock has a trailing yield of around 5.1% on the current share price of CN¥19.64. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Huaibei Mining HoldingsLtd

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. That's why it's good to see Huaibei Mining HoldingsLtd paying out a modest 43% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (59%) of its free cash flow in the past year, which is within an average range for most companies.

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?

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Huaibei Mining HoldingsLtd, with earnings per share up 4.6% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Huaibei Mining HoldingsLtd has delivered 15% dividend growth per year on average over the past five years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has Huaibei Mining HoldingsLtd got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Huaibei Mining HoldingsLtd paid out less than half its profits and more than half its free cash flow as dividends over the last year. All things considered, we are not particularly enthused about Huaibei Mining HoldingsLtd from a dividend perspective.

While it's tempting to invest in Huaibei Mining HoldingsLtd for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Huaibei Mining HoldingsLtd you should know about.

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.