Is It Smart To Buy China Railway Tielong Container Logistics Co., Ltd (SHSE:600125) Before It Goes Ex-Dividend?

It looks like China Railway Tielong Container Logistics Co., Ltd (SHSE:600125) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. This means that investors who purchase China Railway Tielong Container Logistics' shares on or after the 19th of July will not receive the dividend, which will be paid on the 19th of July.

The company's next dividend payment will be CN¥0.11 per share. Last year, in total, the company distributed CN¥0.11 to shareholders. Looking at the last 12 months of distributions, China Railway Tielong Container Logistics has a trailing yield of approximately 1.8% on its current stock price of CN¥5.96. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether China Railway Tielong Container Logistics can afford its dividend, and if the dividend could grow.

Check out our latest analysis for China Railway Tielong Container Logistics

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. That's why it's good to see China Railway Tielong Container Logistics paying out a modest 28% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 32% of its free cash flow in the past year.

It's positive to see that China Railway Tielong Container Logistics'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?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about China Railway Tielong Container Logistics's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, nine years ago, China Railway Tielong Container Logistics has lifted its dividend by approximately 3.6% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid China Railway Tielong Container Logistics? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and China Railway Tielong Container Logistics is halfway there. Overall we think this is an attractive combination and worthy of further research.

In light of that, while China Railway Tielong Container Logistics has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for China Railway Tielong Container Logistics that we recommend you consider before investing in the business.

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