It looks like Henan Shuanghui Investment & Development Co.,Ltd. (SZSE:000895) is about to go ex-dividend in the next two days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Therefore, if you purchase Henan Shuanghui Investment & DevelopmentLtd's shares on or after the 26th of April, you won't be eligible to receive the dividend, when it is paid on the 26th of April.
The company's upcoming dividend is CN¥0.70 a share, following on from the last 12 months, when the company distributed a total of CN¥1.45 per share to shareholders. Based on the last year's worth of payments, Henan Shuanghui Investment & DevelopmentLtd has a trailing yield of 5.3% on the current stock price of CN¥27.19. If you buy this business for its dividend, you should have an idea of whether Henan Shuanghui Investment & DevelopmentLtd's dividend is reliable and sustainable. As a result, readers should always check whether Henan Shuanghui Investment & DevelopmentLtd has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Henan Shuanghui Investment & DevelopmentLtd paid out 104% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. 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. Over the last year, it paid out dividends equivalent to 218% of what it generated in free cash flow, a disturbingly high percentage. Our definition of free cash flow excludes cash generated from asset sales, so since Henan Shuanghui Investment & DevelopmentLtd is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.
Cash is slightly more important than profit from a dividend perspective, but given Henan Shuanghui Investment & DevelopmentLtd's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that Henan Shuanghui Investment & DevelopmentLtd's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Henan Shuanghui Investment & DevelopmentLtd has increased its dividend at approximately 12% a year on average.
To Sum It Up
Is Henan Shuanghui Investment & DevelopmentLtd an attractive dividend stock, or better left on the shelf? Not only are earnings per share flat, but Henan Shuanghui Investment & DevelopmentLtd is paying out an uncomfortably high percentage of both its earnings and cashflow to shareholders as dividends. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
So if you're still interested in Henan Shuanghui Investment & DevelopmentLtd despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example - Henan Shuanghui Investment & DevelopmentLtd has 1 warning sign we think you should be aware of.
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.