China Southern Power Grid Technology Co.,Ltd (SHSE:688248) stock is about to trade ex-dividend in three 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 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. Thus, you can purchase China Southern Power Grid TechnologyLtd's shares before the 11th of October in order to receive the dividend, which the company will pay on the 11th of October.

The company's next dividend payment will be CN¥0.135 per share. Last year, in total, the company distributed CN¥0.17 to shareholders. Calculating the last year's worth of payments shows that China Southern Power Grid TechnologyLtd has a trailing yield of 0.8% on the current share price of CN¥34.20. If you buy this business for its dividend, you should have an idea of whether China Southern Power Grid TechnologyLtd's dividend is reliable and sustainable. So we need to investigate whether China Southern Power Grid TechnologyLtd can afford its dividend, and if the dividend could grow.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. China Southern Power Grid TechnologyLtd paid out more than half (50%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether China Southern Power Grid TechnologyLtd generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 0.2% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see China Southern Power Grid TechnologyLtd's earnings have been skyrocketing, up 34% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, China Southern Power Grid TechnologyLtd could have strong prospects for future increases to the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last two years, China Southern Power Grid TechnologyLtd has lifted its dividend by approximately 78% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid China Southern Power Grid TechnologyLtd? We like China Southern Power Grid TechnologyLtd's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about China Southern Power Grid TechnologyLtd, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks China Southern Power Grid TechnologyLtd is facing. To help with this, we've discovered 1 warning sign for China Southern Power Grid TechnologyLtd that you should be aware of before investing in their shares.

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.