Shanghai Lujiazui Finance & Trade Zone Development Co.,Ltd. (SHSE:600663) Is About To Go Ex-Dividend, And It Pays A 1.1% Yield

Shanghai Lujiazui Finance & Trade Zone Development Co.,Ltd. (SHSE:600663) is about to trade ex-dividend in the next 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. Therefore, if you purchase Shanghai Lujiazui Finance & Trade Zone DevelopmentLtd's shares on or after the 3rd of June, you won't be eligible to receive the dividend, when it is paid on the 3rd of June.

The company's next dividend payment will be CN¥0.114 per share, on the back of last year when the company paid a total of CN¥0.11 to shareholders. Looking at the last 12 months of distributions, Shanghai Lujiazui Finance & Trade Zone DevelopmentLtd has a trailing yield of approximately 1.1% on its current stock price of CN¥10.17. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Shanghai Lujiazui Finance & Trade Zone DevelopmentLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shanghai Lujiazui Finance & Trade Zone DevelopmentLtd paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Shanghai Lujiazui Finance & Trade Zone DevelopmentLtd generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.

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 Shanghai Lujiazui Finance & Trade Zone DevelopmentLtd 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 Lujiazui Finance & Trade Zone DevelopmentLtd's earnings per share have fallen at approximately 23% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Shanghai Lujiazui Finance & Trade Zone DevelopmentLtd has lifted its dividend by approximately 0.9% a year on average.

The Bottom Line

Is Shanghai Lujiazui Finance & Trade Zone DevelopmentLtd worth buying for its dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you want to look further into Shanghai Lujiazui Finance & Trade Zone DevelopmentLtd, it's worth knowing the risks this business faces. Our analysis shows 4 warning signs for Shanghai Lujiazui Finance & Trade Zone DevelopmentLtd 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.