Should You Buy Tianjin Port Co., Ltd. (SHSE:600717) For Its Upcoming Dividend?

Readers hoping to buy Tianjin Port Co., Ltd. (SHSE:600717) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Tianjin Port's shares before the 20th of June in order to receive the dividend, which the company will pay on the 20th of June.

The company's upcoming dividend is CN¥0.102 a share, following on from the last 12 months, when the company distributed a total of CN¥0.10 per share to shareholders. Based on the last year's worth of payments, Tianjin Port stock has a trailing yield of around 2.4% on the current share price of CN¥4.27. If you buy this business for its dividend, you should have an idea of whether Tianjin Port's dividend is reliable and sustainable. So we need to investigate whether Tianjin Port can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Tianjin Port

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Tianjin Port's payout ratio is modest, at just 29% of profit. A useful secondary check can be to evaluate whether Tianjin Port generated enough free cash flow to afford its dividend. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Tianjin Port'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 Tianjin Port paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Tianjin Port's earnings per share have been growing at 13% 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. Tianjin Port's dividend payments per share have declined at 0.9% per year on average over the past 10 years, which is uninspiring.

To Sum It Up

Should investors buy Tianjin Port for the upcoming dividend? It's great that Tianjin Port is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Tianjin Port looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Tianjin Port is facing. Our analysis shows 1 warning sign for Tianjin Port and you should be aware of it before buying any shares.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com