Is It Smart To Buy Xinjiang Haoyuan Natural Gas Co., Ltd. (SZSE:002700) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Xinjiang Haoyuan Natural Gas Co., Ltd. (SZSE:002700) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Xinjiang Haoyuan Natural Gas' shares before the 10th of July in order to receive the dividend, which the company will pay on the 10th of July.

The company's upcoming dividend is CN¥0.072 a share, following on from the last 12 months, when the company distributed a total of CN¥0.072 per share to shareholders. Based on the last year's worth of payments, Xinjiang Haoyuan Natural Gas has a trailing yield of 0.9% on the current stock price of CN¥7.95. 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! As a result, readers should always check whether Xinjiang Haoyuan Natural Gas has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Xinjiang Haoyuan Natural Gas

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. That's why it's good to see Xinjiang Haoyuan Natural Gas paying out a modest 30% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.

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 Xinjiang Haoyuan Natural Gas paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Xinjiang Haoyuan Natural Gas, with earnings per share up 7.1% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Xinjiang Haoyuan Natural Gas has increased its dividend at approximately 8.0% 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.

Final Takeaway

Should investors buy Xinjiang Haoyuan Natural Gas for the upcoming dividend? Earnings per share have been growing moderately, and Xinjiang Haoyuan Natural Gas is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Xinjiang Haoyuan Natural Gas is halfway there. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Xinjiang Haoyuan Natural Gas for the dividends alone, you should always be mindful of the risks involved. For example - Xinjiang Haoyuan Natural Gas has 1 warning sign we think you should be aware of.

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.

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.

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