Dynagreen Environmental Protection Group Co., Ltd. (HKG:1330) Pays A CN¥0.10 Dividend In Just Three Days

Dynagreen Environmental Protection Group Co., Ltd. (HKG:1330) is about to trade ex-dividend in the next 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Dynagreen Environmental Protection Group's shares on or after the 26th of September will not receive the dividend, which will be paid on the 20th of November.

The company's next dividend payment will be CN¥0.10 per share, on the back of last year when the company paid a total of CN¥0.20 to shareholders. Last year's total dividend payments show that Dynagreen Environmental Protection Group has a trailing yield of 6.9% on the current share price of HK$3.19. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Dynagreen Environmental Protection Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Dynagreen Environmental Protection Group

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Dynagreen Environmental Protection Group paid out more than half (61%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the past year it paid out 116% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Dynagreen Environmental Protection Group 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 Dynagreen Environmental Protection Group 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 Dynagreen Environmental Protection 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Dynagreen Environmental Protection Group earnings per share are up 4.4% per annum over the last five years. 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. Since the start of our data, eight years ago, Dynagreen Environmental Protection Group has lifted its dividend by approximately 27% 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

Is Dynagreen Environmental Protection Group an attractive dividend stock, or better left on the shelf? Dynagreen Environmental Protection Group is paying out a reasonable percentage of its income and an uncomfortably high 116% of its cash flow as dividends. At least earnings per share have been growing steadily. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

So if you're still interested in Dynagreen Environmental Protection Group despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. We've identified 2 warning signs with Dynagreen Environmental Protection Group (at least 1 which can't be ignored), and understanding these should be part of your investment process.

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.