Four Days Left To Buy China Railway Signal & Communication Corporation Limited (HKG:3969) Before The Ex-Dividend Date

It looks like China Railway Signal & Communication Corporation Limited (HKG:3969) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase China Railway Signal & Communication's shares before the 18th of June in order to be eligible for the dividend, which will be paid on the 30th of August.

The company's next dividend payment will be CN¥0.17 per share, and in the last 12 months, the company paid a total of CN¥0.17 per share. Based on the last year's worth of payments, China Railway Signal & Communication stock has a trailing yield of around 5.5% on the current share price of HK$3.33. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for China Railway Signal & Communication

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. China Railway Signal & Communication paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether China Railway Signal & Communication generated enough free cash flow to afford its dividend. Fortunately, it paid out only 44% of its free cash flow in the past year.

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?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that China Railway Signal & Communication's earnings are down 3.3% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. China Railway Signal & Communication has delivered 27% dividend growth per year on average over the past eight years. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

To Sum It Up

From a dividend perspective, should investors buy or avoid China Railway Signal & Communication? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. In summary, while it has some positive characteristics, we're not inclined to race out and buy China Railway Signal & Communication today.

However if you're still interested in China Railway Signal & Communication as a potential investment, you should definitely consider some of the risks involved with China Railway Signal & Communication. Every company has risks, and we've spotted 1 warning sign for China Railway Signal & Communication you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.