Be Sure To Check Out Hangzhou Cogeneration Group Co., Ltd. (SHSE:605011) Before It Goes Ex-Dividend

Hangzhou Cogeneration Group Co., Ltd. (SHSE:605011) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. This means that investors who purchase Hangzhou Cogeneration Group's shares on or after the 7th of June will not receive the dividend, which will be paid on the 7th of June.

The company's next dividend payment will be CN¥0.16 per share, and in the last 12 months, the company paid a total of CN¥0.16 per share. Last year's total dividend payments show that Hangzhou Cogeneration Group has a trailing yield of 0.6% on the current share price of CN¥26.99. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Hangzhou Cogeneration Group

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. Hangzhou Cogeneration Group paid out a comfortable 30% of its profit last year. 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. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Hangzhou Cogeneration Group 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Hangzhou Cogeneration Group earnings per share are up 4.3% per annum over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hangzhou Cogeneration Group's dividend payments per share have declined at 24% per year on average over the past three years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Is Hangzhou Cogeneration Group an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Hangzhou Cogeneration Group is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Hangzhou Cogeneration Group is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Hangzhou Cogeneration Group is facing. To help with this, we've discovered 1 warning sign for Hangzhou Cogeneration Group 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.

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

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.