Nanjing Port Co., Ltd. (SZSE:002040) Is About To Go Ex-Dividend, And It Pays A 1.9% Yield

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Nanjing Port Co., Ltd. (SZSE:002040) is about to go ex-dividend in just 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. 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. In other words, investors can purchase Nanjing Port's shares before the 1st of July in order to be eligible for the dividend, which will be paid on the 1st of July.

The company's next dividend payment will be CN¥0.102 per share. Last year, in total, the company distributed CN¥0.10 to shareholders. Looking at the last 12 months of distributions, Nanjing Port has a trailing yield of approximately 1.9% on its current stock price of CN¥5.38. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Nanjing Port has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Nanjing Port

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. Nanjing Port paid out a comfortable 29% of its profit last year. A useful secondary check can be to evaluate whether Nanjing Port generated enough free cash flow to afford its dividend. The company paid out 103% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Nanjing Port paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Nanjing Port to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Nanjing Port paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Nanjing Port's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Nanjing Port has lifted its dividend by approximately 21% a year on average.

Final Takeaway

Has Nanjing Port got what it takes to maintain its dividend payments? Earnings per share have barely grown in this time, and although Nanjing Port is paying out a low percentage of its profit, its dividend was not well covered by free cash flow. Only rarely do we find companies paying out a low percentage of their profits yet a high percentage of their cash flow, so we'd mark this as a concern. To summarise, Nanjing Port looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you're not too concerned about Nanjing Port's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we've discovered 1 warning sign for Nanjing Port that you should be aware of before investing in their 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.

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