Be Sure To Check Out Huaihe Energy (Group) Co.,Ltd (SHSE:600575) Before It Goes Ex-Dividend

It looks like Huaihe Energy (Group) Co.,Ltd (SHSE:600575) is about to go ex-dividend in the next three days. 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 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 Huaihe Energy (Group)Ltd's shares on or after the 18th of June will not receive the dividend, which will be paid on the 18th of June.

The company's next dividend payment will be CN¥0.12 per share, on the back of last year when the company paid a total of CN¥0.12 to shareholders. Based on the last year's worth of payments, Huaihe Energy (Group)Ltd stock has a trailing yield of around 3.1% on the current share price of CN¥3.93. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Huaihe Energy (Group)Ltd

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. That's why it's good to see Huaihe Energy (Group)Ltd paying out a modest 48% of its earnings. 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. The good news is it paid out just 19% of its free cash flow in the last year.

It's positive to see that Huaihe Energy (Group)Ltd'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 how much of its profit Huaihe Energy (Group)Ltd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Huaihe Energy (Group)Ltd's earnings per share have been growing at 18% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

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, four years ago, Huaihe Energy (Group)Ltd has lifted its dividend by approximately 4.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Huaihe Energy (Group)Ltd is keeping back more of its profits to grow the business.

Final Takeaway

Should investors buy Huaihe Energy (Group)Ltd for the upcoming dividend? Huaihe Energy (Group)Ltd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past four years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for Huaihe Energy (Group)Ltd that we recommend you consider before investing in the business.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.

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