Only Four Days Left To Cash In On Beijing Caishikou Department StoreLtd's (SHSE:605599) Dividend

Readers hoping to buy Beijing Caishikou Department Store Co.,Ltd. (SHSE:605599) 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Beijing Caishikou Department StoreLtd's shares on or after the 5th of June, you won't be eligible to receive the dividend, when it is paid on the 5th of June.

The company's next dividend payment will be CN¥0.70 per share, on the back of last year when the company paid a total of CN¥0.70 to shareholders. Calculating the last year's worth of payments shows that Beijing Caishikou Department StoreLtd has a trailing yield of 4.9% on the current share price of CN¥14.28. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Beijing Caishikou Department StoreLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for Beijing Caishikou Department StoreLtd

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. Beijing Caishikou Department StoreLtd is paying out an acceptable 73% of its profit, a common payout level among most companies. 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 paid out 77% 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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Beijing Caishikou Department StoreLtd's earnings per share have been growing at 13% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Beijing Caishikou Department StoreLtd has delivered 39% dividend growth per year on average over the past two years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is Beijing Caishikou Department StoreLtd worth buying for its dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Beijing Caishikou Department StoreLtd is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Beijing Caishikou Department StoreLtd's dividend merits.

On that note, you'll want to research what risks Beijing Caishikou Department StoreLtd is facing. For example, we've found 2 warning signs for Beijing Caishikou Department StoreLtd (1 makes us a bit uncomfortable!) that deserve your attention before investing in 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.

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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.