Two Days Left Until Shanghai International Port (Group) Co., Ltd. (SHSE:600018) Trades Ex-Dividend

Readers hoping to buy Shanghai International Port (Group) Co., Ltd. (SHSE:600018) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Shanghai International Port (Group)'s shares on or after the 26th of December will not receive the dividend, which will be paid on the 26th of December.

The company's upcoming dividend is CN¥0.05 a share, following on from the last 12 months, when the company distributed a total of CN¥0.10 per share to shareholders. Looking at the last 12 months of distributions, Shanghai International Port (Group) has a trailing yield of approximately 1.7% on its current stock price of CN¥5.99. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Shanghai International Port (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. Shanghai International Port (Group) paid out a comfortable 38% of its profit last year. 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. Dividends consumed 67% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Shanghai International Port (Group)'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Shanghai International Port (Group) earnings per share are up 5.8% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Shanghai International Port (Group) has seen its dividend decline 2.4% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

To Sum It Up

Has Shanghai International Port (Group) got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Shanghai International Port (Group) paid out less than half its profits and more than half its free cash flow as dividends over the last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Shanghai International Port (Group)'s dividend merits.

While it's tempting to invest in Shanghai International Port (Group) for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Shanghai International Port (Group) and you should be aware of this before buying any 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.