Is It Smart To Buy Heilongjiang Publishing & Media Co., Ltd. (SHSE:605577) Before It Goes 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 Heilongjiang Publishing & Media Co., Ltd. (SHSE:605577) is about to go ex-dividend in just three 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 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. This means that investors who purchase Heilongjiang Publishing & Media's shares on or after the 5th of July will not receive the dividend, which will be paid on the 5th of July.

The company's next dividend payment will be CN¥0.08 per share. Last year, in total, the company distributed CN¥0.08 to shareholders. Last year's total dividend payments show that Heilongjiang Publishing & Media has a trailing yield of 0.5% on the current share price of CN¥15.73. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Heilongjiang Publishing & Media can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Heilongjiang Publishing & Media

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. Heilongjiang Publishing & Media paid out just 10% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Heilongjiang Publishing & Media'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 how much of its profit Heilongjiang Publishing & Media paid out over the last 12 months.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Heilongjiang Publishing & Media earnings per share are up 6.5% per annum over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Heilongjiang Publishing & Media's dividend payments per share have declined at 11% per year on average over the past two years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

From a dividend perspective, should investors buy or avoid Heilongjiang Publishing & Media? Earnings per share have been growing moderately, and Heilongjiang Publishing & Media is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Heilongjiang Publishing & Media is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Heilongjiang Publishing & Media, and we would prioritise taking a closer look at it.

While it's tempting to invest in Heilongjiang Publishing & Media for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Heilongjiang Publishing & Media that we recommend you consider before investing in the business.

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.

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