Here's What We Like About Henan Mingtai Al.IndustrialLtd's (SHSE:601677) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Henan Mingtai Al.Industrial Co.,Ltd. (SHSE:601677) is about to trade ex-dividend in the next two days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Henan Mingtai Al.IndustrialLtd's shares before the 27th of June in order to be eligible for the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be CN¥0.13 per share, on the back of last year when the company paid a total of CN¥0.17 to shareholders. Based on the last year's worth of payments, Henan Mingtai Al.IndustrialLtd has a trailing yield of 1.4% on the current stock price of CN¥11.70. 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 Henan Mingtai Al.IndustrialLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Henan Mingtai Al.IndustrialLtd paid out just 11% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Thankfully its dividend payments took up just 39% 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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Henan Mingtai Al.IndustrialLtd's earnings per share have risen 13% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

We'd also point out that Henan Mingtai Al.IndustrialLtd issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Henan Mingtai Al.IndustrialLtd has delivered an average of 8.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy Henan Mingtai Al.IndustrialLtd for the upcoming dividend? It's great that Henan Mingtai Al.IndustrialLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Henan Mingtai Al.IndustrialLtd has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Henan Mingtai Al.IndustrialLtd that we recommend you consider before investing in the business.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com