Income Investors Should Know That China Resources Gas Group Limited (HKG:1193) Goes Ex-Dividend Soon

Readers hoping to buy China Resources Gas Group Limited (HKG:1193) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Meaning, you will need to purchase China Resources Gas Group's shares before the 28th of May to receive the dividend, which will be paid on the 17th of July.

The company's upcoming dividend is HK$1.0069 a share, following on from the last 12 months, when the company distributed a total of HK$1.16 per share to shareholders. Calculating the last year's worth of payments shows that China Resources Gas Group has a trailing yield of 4.1% on the current share price of HK$28.00. If you buy this business for its dividend, you should have an idea of whether China Resources Gas Group'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 China Resources Gas Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. China Resources Gas Group paid out 50% of its earnings to investors last year, a normal payout level for most businesses. 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. Thankfully its dividend payments took up just 48% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that China Resources Gas Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see China Resources Gas Group earnings per share are up 2.0% per annum over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, China Resources Gas Group has lifted its dividend by approximately 22% 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.

To Sum It Up

Is China Resources Gas Group an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest and China Resources Gas Group paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, it's hard to get excited about China Resources Gas Group from a dividend perspective.

While it's tempting to invest in China Resources Gas Group for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for China Resources Gas Group that we recommend you consider before investing in the business.

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.

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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.