Shanghai Chengtou Holding Co.,Ltd (SHSE:600649) Is About To Go Ex-Dividend, And It Pays A 1.7% Yield

Shanghai Chengtou Holding Co.,Ltd (SHSE:600649) is about to trade ex-dividend in the next two 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. Therefore, if you purchase Shanghai Chengtou HoldingLtd's shares on or after the 18th of July, you won't be eligible to receive the dividend, when it is paid on the 18th of July.

The company's next dividend payment will be CN¥0.06 per share, and in the last 12 months, the company paid a total of CN¥0.06 per share. Calculating the last year's worth of payments shows that Shanghai Chengtou HoldingLtd has a trailing yield of 1.7% on the current share price of CN¥3.48. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Shanghai Chengtou HoldingLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shanghai Chengtou HoldingLtd paid out a comfortable 40% of its profit last year. 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. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Shanghai Chengtou HoldingLtd'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 Shanghai Chengtou HoldingLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Shanghai Chengtou HoldingLtd's earnings per share have fallen at approximately 19% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Shanghai Chengtou HoldingLtd's dividend payments per share have declined at 8.8% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Is Shanghai Chengtou HoldingLtd an attractive dividend stock, or better left on the shelf? Shanghai Chengtou HoldingLtd has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Shanghai Chengtou HoldingLtd's dividend merits.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Shanghai Chengtou HoldingLtd that we strongly recommend you have a look at before investing in the company.

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