Don't Buy Chang Chun Eurasia Group Co., Ltd. (SHSE:600697) For Its Next Dividend Without Doing These Checks

Chang Chun Eurasia Group Co., Ltd. (SHSE:600697) stock is about to trade ex-dividend in three 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Chang Chun Eurasia Group's shares before the 8th of July in order to receive the dividend, which the company will pay on the 8th of July.

The company's next dividend payment will be CN¥0.11 per share, and in the last 12 months, the company paid a total of CN¥0.11 per share. Based on the last year's worth of payments, Chang Chun Eurasia Group has a trailing yield of 1.1% on the current stock price of CN¥10.06. If you buy this business for its dividend, you should have an idea of whether Chang Chun Eurasia Group's dividend is reliable and sustainable. So we need to investigate whether Chang Chun Eurasia Group can afford its dividend, and if the dividend could grow.

View our latest analysis for Chang Chun Eurasia Group

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. It paid out 77% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in 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. Dividends consumed 55% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 Chang Chun Eurasia Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Chang Chun Eurasia Group's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 39% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Chang Chun Eurasia Group's dividend payments per share have declined at 10% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Has Chang Chun Eurasia Group got what it takes to maintain its dividend payments? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. Bottom line: Chang Chun Eurasia Group has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in Chang Chun Eurasia Group despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To help with this, we've discovered 2 warning signs for Chang Chun Eurasia Group (1 is a bit concerning!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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

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