Interested In Guangdong Goworld's (SZSE:000823) Upcoming CN¥0.10 Dividend? You Have Three Days Left

Guangdong Goworld Co., Ltd. (SZSE:000823) stock is about to trade ex-dividend in 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Guangdong Goworld's shares before the 30th of May to receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be CN¥0.10 per share. Last year, in total, the company distributed CN¥0.10 to shareholders. Last year's total dividend payments show that Guangdong Goworld has a trailing yield of 1.3% on the current share price of CN¥7.90. 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 Guangdong Goworld can afford its dividend, and if the dividend could grow.

See our latest analysis for Guangdong Goworld

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. Fortunately Guangdong Goworld's payout ratio is modest, at just 27% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (58%) of its free cash flow in the past year, which is within an average range for most companies.

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 Guangdong Goworld paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Guangdong Goworld's earnings per share have dropped 6.0% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Guangdong Goworld's dividend payments per share have declined at 1.8% per year on average over the past 10 years, which is uninspiring.

Final Takeaway

Is Guangdong Goworld an attractive dividend stock, or better left on the shelf? Earnings per share have fallen significantly, although at least Guangdong Goworld paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. In summary, while it has some positive characteristics, we're not inclined to race out and buy Guangdong Goworld today.

With that being said, if dividends aren't your biggest concern with Guangdong Goworld, you should know about the other risks facing this business. We've identified 3 warning signs with Guangdong Goworld (at least 1 which is a bit unpleasant), and understanding these should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.