Should Income Investors Look At Citic Pacific Special Steel Group Co., Ltd (SZSE:000708) 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 Citic Pacific Special Steel Group Co., Ltd (SZSE:000708) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Citic Pacific Special Steel Group investors that purchase the stock on or after the 10th of May will not receive the dividend, which will be paid on the 10th of May.

The company's upcoming dividend is CN¥0.564674 a share, following on from the last 12 months, when the company distributed a total of CN¥0.56 per share to shareholders. Last year's total dividend payments show that Citic Pacific Special Steel Group has a trailing yield of 3.6% on the current share price of CN¥15.88. If you buy this business for its dividend, you should have an idea of whether Citic Pacific Special Steel Group'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.

See our latest analysis for Citic Pacific Special Steel Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Citic Pacific Special Steel Group paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (51%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Citic Pacific Special Steel Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Citic Pacific Special Steel Group earnings per share are up 7.1% per annum over the last five years. Decent historical earnings per share growth suggests Citic Pacific Special Steel Group has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Citic Pacific Special Steel Group has lifted its dividend by approximately 17% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Citic Pacific Special Steel Group? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. In summary, while it has some positive characteristics, we're not inclined to race out and buy Citic Pacific Special Steel Group today.

With that being said, if dividends aren't your biggest concern with Citic Pacific Special Steel Group, you should know about the other risks facing this business. For example, we've found 2 warning signs for Citic Pacific Special Steel Group that we recommend you consider before investing in the business.

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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.