Why You Might Be Interested In Yanzhou Coal Mining Company Limited (HKG:1171) For Its Upcoming Dividend

Yanzhou Coal Mining Company Limited (HKG:1171) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 24th of June to receive the dividend, which will be paid on the 19th of August.

Yanzhou Coal Mining's next dividend payment will be HK$0.58 per share, on the back of last year when the company paid a total of HK$0.58 to shareholders. Based on the last year's worth of payments, Yanzhou Coal Mining has a trailing yield of 9.5% on the current stock price of HK$6.65. If you buy this business for its dividend, you should have an idea of whether Yanzhou Coal Mining's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Yanzhou Coal Mining

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Yanzhou Coal Mining paying out a modest 36% of its earnings. 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. Dividends consumed 59% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Yanzhou Coal Mining's earnings have been skyrocketing, up 30% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last ten years, Yanzhou Coal Mining has lifted its dividend by approximately 8.8% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Yanzhou Coal Mining worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Yanzhou Coal Mining paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Yanzhou Coal Mining for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Yanzhou Coal Mining that we recommend you consider before investing in the business.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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. Thank you for reading.