China Container Terminal Corporation (TWSE:2613) Will Pay A NT$0.60 Dividend In Three Days

Readers hoping to buy China Container Terminal Corporation (TWSE:2613) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase China Container Terminal's shares on or after the 14th of March, you won't be eligible to receive the dividend, when it is paid on the 12th of April.

The company's next dividend payment will be NT$0.60 per share, and in the last 12 months, the company paid a total of NT$0.60 per share. Based on the last year's worth of payments, China Container Terminal has a trailing yield of 2.6% on the current stock price of NT$22.65. If you buy this business for its dividend, you should have an idea of whether China Container Terminal'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 Container Terminal

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. China Container Terminal distributed an unsustainably high 197% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 33% of its free cash flow in the past year.

It's good to see that while China Container Terminal's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see how much of its profit China Container Terminal paid out over the last 12 months.

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. 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 China Container Terminal earnings per share are up 6.2% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. China Container Terminal has delivered an average of 17% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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.

The Bottom Line

Is China Container Terminal an attractive dividend stock, or better left on the shelf? China Container Terminal has been steadily growing its earnings per share, and it is paying out just 33% of its cash flow but an uncomfortably high 197% of its income. In summary, while it has some positive characteristics, we're not inclined to race out and buy China Container Terminal today.

If you're not too concerned about China Container Terminal's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Every company has risks, and we've spotted 3 warning signs for China Container Terminal 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.