Sinomine Resource Group Co., Ltd. (SZSE:002738) Stock Goes Ex-Dividend In Just Three Days

Sinomine Resource Group Co., Ltd. (SZSE:002738) stock is about to trade ex-dividend in 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Sinomine Resource Group investors that purchase the stock on or after the 30th of May will not receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be CN¥1.00 per share. Last year, in total, the company distributed CN¥1.00 to shareholders. Looking at the last 12 months of distributions, Sinomine Resource Group has a trailing yield of approximately 3.1% on its current stock price of CN¥32.28. If you buy this business for its dividend, you should have an idea of whether Sinomine Resource 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.

Check out our latest analysis for Sinomine Resource Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Sinomine Resource Group is paying out an acceptable 53% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Sinomine Resource Group generated enough free cash flow to afford its dividend. It paid out an unsustainably high 348% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Sinomine Resource Group is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

Sinomine Resource Group does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Sinomine Resource Group paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Sinomine Resource Group's ability to maintain its dividend.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Sinomine Resource Group has grown its earnings rapidly, up 48% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last nine years, Sinomine Resource Group has lifted its dividend by approximately 39% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy Sinomine Resource Group for the upcoming dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Sinomine Resource Group paid out a much higher percentage of its free cash flow, which makes us uncomfortable. In summary, it's hard to get excited about Sinomine Resource Group from a dividend perspective.

If you're not too concerned about Sinomine Resource Group's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. In terms of investment risks, we've identified 2 warning signs with Sinomine Resource Group and understanding them should be part of your investment process.

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.