Income Investors Should Know That Xiamen Kingdomway Group Company (SZSE:002626) Goes Ex-Dividend Soon

Xiamen Kingdomway Group Company (SZSE:002626) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Thus, you can purchase Xiamen Kingdomway Group's shares before the 6th of June in order to receive the dividend, which the company will pay on the 6th of June.

The company's upcoming dividend is CN¥0.20 a share, following on from the last 12 months, when the company distributed a total of CN¥0.20 per share to shareholders. Based on the last year's worth of payments, Xiamen Kingdomway Group has a trailing yield of 1.3% on the current stock price of CN¥15.18. 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.

See our latest analysis for Xiamen Kingdomway 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. Fortunately Xiamen Kingdomway Group's payout ratio is modest, at just 47% of profit. 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 81% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 how much of its profit Xiamen Kingdomway Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Xiamen Kingdomway Group's earnings per share have fallen at approximately 17% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Xiamen Kingdomway Group has delivered 2.5% dividend growth per year on average over the past 10 years.

The Bottom Line

Has Xiamen Kingdomway Group got what it takes to maintain its dividend payments? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. All things considered, we are not particularly enthused about Xiamen Kingdomway Group from a dividend perspective.

If you want to look further into Xiamen Kingdomway Group, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 2 warning signs for Xiamen Kingdomway Group (of which 1 is significant!) you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.