Is It Worth Considering Puyang Refractories Group Co., Ltd. (SZSE:002225) For Its Upcoming 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 Puyang Refractories Group Co., Ltd. (SZSE:002225) is about to go ex-dividend in just two 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Puyang Refractories Group's shares before the 20th of June in order to receive the dividend, which the company will pay on the 20th of June.

The company's upcoming dividend is CN¥0.07 a share, following on from the last 12 months, when the company distributed a total of CN¥0.07 per share to shareholders. Based on the last year's worth of payments, Puyang Refractories Group stock has a trailing yield of around 1.8% on the current share price of CN¥3.86. If you buy this business for its dividend, you should have an idea of whether Puyang Refractories 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.

View our latest analysis for Puyang Refractories 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. That's why it's good to see Puyang Refractories Group paying out a modest 26% of its earnings. A useful secondary check can be to evaluate whether Puyang Refractories Group generated enough free cash flow to afford its dividend. Dividends consumed 67% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Puyang Refractories Group'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 growth has been slim and the company is paying out more than half 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. Puyang Refractories Group has delivered an average of 3.4% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Is Puyang Refractories Group worth buying for its dividend? Puyang Refractories Group has struggled to grow earnings per share, and it's paying out less than half of its earnings and more than half its cash flow to shareholders as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

While it's tempting to invest in Puyang Refractories Group for the dividends alone, you should always be mindful of the risks involved. For example, Puyang Refractories Group has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.

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