Chengdu Gas Group Corporation Ltd. (SHSE:603053) Stock Goes Ex-Dividend In Just Three Days

Readers hoping to buy Chengdu Gas Group Corporation Ltd. (SHSE:603053) 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 Chengdu Gas Group's shares before the 5th of July in order to receive the dividend, which the company will pay on the 5th of July.

The company's next dividend payment will be CN¥0.30 per share. Last year, in total, the company distributed CN¥0.30 to shareholders. Calculating the last year's worth of payments shows that Chengdu Gas Group has a trailing yield of 3.0% on the current share price of CN¥9.85. 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.

See our latest analysis for Chengdu Gas Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Chengdu Gas Group paid out 50% of its earnings to investors last year, a normal payout level for most businesses. 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 Chengdu Gas Group'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 Chengdu Gas Group 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Chengdu Gas Group, with earnings per share up 2.4% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past four years, Chengdu Gas Group has increased its dividend at approximately 5.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Chengdu Gas Group an attractive dividend stock, or better left on the shelf? While earnings per share growth has been modest, Chengdu Gas Group's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. In summary, while it has some positive characteristics, we're not inclined to race out and buy Chengdu Gas Group today.

In light of that, while Chengdu Gas Group has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Chengdu Gas Group and you should be aware of it before buying any shares.

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.

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