COSCO SHIPPING Holdings Co., Ltd. (HKG:1919) Stock Goes Ex-Dividend In Just Three Days

Readers hoping to buy COSCO SHIPPING Holdings Co., Ltd. (HKG:1919) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase COSCO SHIPPING Holdings' shares before the 31st of May in order to receive the dividend, which the company will pay on the 28th of June.

The company's next dividend payment will be CN¥0.23 per share, on the back of last year when the company paid a total of CN¥0.46 to shareholders. Based on the last year's worth of payments, COSCO SHIPPING Holdings has a trailing yield of 4.0% on the current stock price of HK$12.56. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether COSCO SHIPPING Holdings has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for COSCO SHIPPING Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. COSCO SHIPPING Holdings is paying out an acceptable 51% of its profit, a common payout level among 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. It paid out an unsustainably high 313% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.

COSCO SHIPPING Holdings does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

While COSCO SHIPPING Holdings's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were COSCO SHIPPING Holdings to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. It's encouraging to see COSCO SHIPPING Holdings has grown its earnings rapidly, up 74% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. COSCO SHIPPING Holdings's dividend payments per share have declined at 27% per year on average over the past two years, which is uninspiring. COSCO SHIPPING Holdings is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Has COSCO SHIPPING Holdings got what it takes to maintain its dividend payments? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note COSCO SHIPPING Holdings paid out a much higher percentage of its free cash flow, which makes us uncomfortable. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you want to look further into COSCO SHIPPING Holdings, it's worth knowing the risks this business faces. To that end, you should learn about the 3 warning signs we've spotted with COSCO SHIPPING Holdings (including 1 which can't be ignored).

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.