Shanghai Conglin Environmental Protection Technology Co., Ltd. (SHSE:688370) stock is about to trade ex-dividend in 4 days. 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. Accordingly, Shanghai Conglin Environmental Protection Technology investors that purchase the stock on or after the 3rd of June will not receive the dividend, which will be paid on the 3rd of June.

The company's next dividend payment will be CN¥0.36 per share, and in the last 12 months, the company paid a total of CN¥0.36 per share. Looking at the last 12 months of distributions, Shanghai Conglin Environmental Protection Technology has a trailing yield of approximately 2.0% on its current stock price of CN¥17.62. If you buy this business for its dividend, you should have an idea of whether Shanghai Conglin Environmental Protection Technology's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shanghai Conglin Environmental Protection Technology paid out more than half (67%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out an unsustainably high 244% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Shanghai Conglin Environmental Protection Technology intends to continue funding this dividend, or if it could be forced to cut the payment.

Shanghai Conglin Environmental Protection Technology 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.

Shanghai Conglin Environmental Protection Technology paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Shanghai Conglin Environmental Protection Technology to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Shanghai Conglin Environmental Protection Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Shanghai Conglin Environmental Protection Technology's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 38% a year over the past five years.

Unfortunately Shanghai Conglin Environmental Protection Technology has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Is Shanghai Conglin Environmental Protection Technology an attractive dividend stock, or better left on the shelf? It's definitely not great to see earnings per share shrinking. The company paid out an acceptable percentage of its income, but an uncomfortably high percentage of its cash flow over the past year. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Although, if you're still interested in Shanghai Conglin Environmental Protection Technology and want to know more, you'll find it very useful to know what risks this stock faces. To that end, you should learn about the 4 warning signs we've spotted with Shanghai Conglin Environmental Protection Technology (including 1 which makes us a bit uncomfortable).

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.