Should Income Investors Look At Tianjin You Fa Steel Pipe Group Stock Co., Ltd. (SHSE:601686) Before Its Ex-Dividend?

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 Tianjin You Fa Steel Pipe Group Stock Co., Ltd. (SHSE:601686) is about to go ex-dividend in just 2 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. This means that investors who purchase Tianjin You Fa Steel Pipe Group Stock's shares on or after the 23rd of January will not receive the dividend, which will be paid on the 23rd of January.

The company's next dividend payment will be CN¥0.15 per share, and in the last 12 months, the company paid a total of CN¥0.30 per share. Based on the last year's worth of payments, Tianjin You Fa Steel Pipe Group Stock stock has a trailing yield of around 5.6% on the current share price of CN¥5.33. 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.

See our latest analysis for Tianjin You Fa Steel Pipe Group Stock

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 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. Luckily it paid out just 24% of its free cash flow last year.

Click here to see how much of its profit Tianjin You Fa Steel Pipe Group Stock paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Tianjin You Fa Steel Pipe Group Stock's earnings per share have dropped 12% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tianjin You Fa Steel Pipe Group Stock's dividend payments per share have declined at 9.6% per year on average over the past four years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Has Tianjin You Fa Steel Pipe Group Stock got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. All things considered, we are not particularly enthused about Tianjin You Fa Steel Pipe Group Stock from a dividend perspective.

So while Tianjin You Fa Steel Pipe Group Stock 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 2 warning signs for Tianjin You Fa Steel Pipe Group Stock you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.