Three Days Left To Buy Hunan Friendship&Apollo Commercial Co.,Ltd. (SZSE:002277) Before The Ex-Dividend Date

Hunan Friendship&Apollo Commercial Co.,Ltd. (SZSE:002277) is about to trade ex-dividend in the next three days. 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. This means that investors who purchase Hunan Friendship&Apollo CommercialLtd's shares on or after the 30th of May will not receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be CN¥0.011 per share, and in the last 12 months, the company paid a total of CN¥0.011 per share. Based on the last year's worth of payments, Hunan Friendship&Apollo CommercialLtd stock has a trailing yield of around 0.4% on the current share price of CN¥2.59. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Hunan Friendship&Apollo CommercialLtd

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. Hunan Friendship&Apollo CommercialLtd paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Hunan Friendship&Apollo CommercialLtd generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (76%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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 Hunan Friendship&Apollo CommercialLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Hunan Friendship&Apollo CommercialLtd's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 32% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hunan Friendship&Apollo CommercialLtd has seen its dividend decline 14% per annum on average over the past 10 years, which is not great to see. 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.

Final Takeaway

Should investors buy Hunan Friendship&Apollo CommercialLtd for the upcoming dividend? Earnings per share have fallen significantly, although at least Hunan Friendship&Apollo CommercialLtd paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So if you want to do more digging on Hunan Friendship&Apollo CommercialLtd, you'll find it worthwhile knowing the risks that this stock faces. To that end, you should learn about the 2 warning signs we've spotted with Hunan Friendship&Apollo CommercialLtd (including 1 which is a bit unpleasant).

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.