Read This Before Considering Humanwell Healthcare (Group) Co.,Ltd. (SHSE:600079) For Its Upcoming CN¥0.46 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 Humanwell Healthcare (Group) Co.,Ltd. (SHSE:600079) is about to go ex-dividend in just 3 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. Accordingly, Humanwell Healthcare (Group)Ltd investors that purchase the stock on or after the 24th of June will not receive the dividend, which will be paid on the 24th of June.

The company's next dividend payment will be CN¥0.46 per share, and in the last 12 months, the company paid a total of CN¥0.46 per share. Last year's total dividend payments show that Humanwell Healthcare (Group)Ltd has a trailing yield of 2.6% on the current share price of CN¥17.60. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Humanwell Healthcare (Group)Ltd

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. That's why it's good to see Humanwell Healthcare (Group)Ltd paying out a modest 38% of its earnings. 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. Humanwell Healthcare (Group)Ltd paid out more free cash flow than it generated - 167%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While Humanwell Healthcare (Group)Ltd's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Humanwell Healthcare (Group)Ltd'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. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Humanwell Healthcare (Group)Ltd's earnings have been skyrocketing, up 47% per annum 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Humanwell Healthcare (Group)Ltd has increased its dividend at approximately 23% 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

Is Humanwell Healthcare (Group)Ltd an attractive dividend stock, or better left on the shelf? We like that Humanwell Healthcare (Group)Ltd has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. All things considered, we are not particularly enthused about Humanwell Healthcare (Group)Ltd from a dividend perspective.

So while Humanwell Healthcare (Group)Ltd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for Humanwell Healthcare (Group)Ltd and you should be aware of this before buying any shares.

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.

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