It Might Not Be A Great Idea To Buy GuangDong GenSho Logistics Co.,LTD (SHSE:603813) For Its Next Dividend

It looks like GuangDong GenSho Logistics Co.,LTD (SHSE:603813) is about to go ex-dividend in the next three 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. Meaning, you will need to purchase GuangDong GenSho LogisticsLTD's shares before the 9th of May to receive the dividend, which will be paid on the 9th of May.

The company's next dividend payment will be CN¥0.25 per share, and in the last 12 months, the company paid a total of CN¥0.25 per share. Calculating the last year's worth of payments shows that GuangDong GenSho LogisticsLTD has a trailing yield of 2.2% on the current share price of CN¥11.28. 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.

View our latest analysis for GuangDong GenSho LogisticsLTD

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. GuangDong GenSho LogisticsLTD's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.

Click here to see how much of its profit GuangDong GenSho LogisticsLTD 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. GuangDong GenSho LogisticsLTD was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past six years, GuangDong GenSho LogisticsLTD has increased its dividend at approximately 5.6% a year on average.

We update our analysis on GuangDong GenSho LogisticsLTD every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Should investors buy GuangDong GenSho LogisticsLTD for the upcoming dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: GuangDong GenSho LogisticsLTD has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Although, if you're still interested in GuangDong GenSho LogisticsLTD and want to know more, you'll find it very useful to know what risks this stock faces. For example, GuangDong GenSho LogisticsLTD has 3 warning signs (and 2 which are significant) we think you should know about.

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.