Interested In Inner Mongolia Xinhua Distribution GroupLtd's (SHSE:603230) Upcoming CN¥0.45 Dividend? You Have Four Days Left

Readers hoping to buy Inner Mongolia Xinhua Distribution Group Co.,Ltd. (SHSE:603230) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Inner Mongolia Xinhua Distribution GroupLtd's shares before the 26th of June to receive the dividend, which will be paid on the 26th of June.

The company's upcoming dividend is CN¥0.45 a share, following on from the last 12 months, when the company distributed a total of CN¥0.45 per share to shareholders. Based on the last year's worth of payments, Inner Mongolia Xinhua Distribution GroupLtd stock has a trailing yield of around 3.7% on the current share price of CN¥12.07. If you buy this business for its dividend, you should have an idea of whether Inner Mongolia Xinhua Distribution GroupLtd's dividend is reliable and sustainable. As a result, readers should always check whether Inner Mongolia Xinhua Distribution GroupLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Inner Mongolia Xinhua Distribution GroupLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Inner Mongolia Xinhua Distribution GroupLtd paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Inner Mongolia Xinhua Distribution GroupLtd generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.

It's positive to see that Inner Mongolia Xinhua Distribution GroupLtd'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 Inner Mongolia Xinhua Distribution GroupLtd paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Inner Mongolia Xinhua Distribution GroupLtd earnings per share are up 7.6% per annum over the last five years. Decent historical earnings per share growth suggests Inner Mongolia Xinhua Distribution GroupLtd has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Inner Mongolia Xinhua Distribution GroupLtd has delivered an average of 163% per year annual increase in its dividend, based on the past two years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Inner Mongolia Xinhua Distribution GroupLtd worth buying for its dividend? While earnings per share growth has been modest, Inner Mongolia Xinhua Distribution GroupLtd's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. In summary, it's hard to get excited about Inner Mongolia Xinhua Distribution GroupLtd from a dividend perspective.

In light of that, while Inner Mongolia Xinhua Distribution GroupLtd has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Inner Mongolia Xinhua Distribution GroupLtd has 1 warning sign we think you should be aware of.

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.

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