Readers hoping to buy Chengdu Road & Bridge Engineering CO.,LTD (SZSE:002628) 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 the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Chengdu Road & Bridge EngineeringLTD's shares on or after the 20th of July will not receive the dividend, which will be paid on the 20th of July.

The company's next dividend payment will be CN¥0.023 per share. Last year, in total, the company distributed CN¥0.023 to shareholders. Based on the last year's worth of payments, Chengdu Road & Bridge EngineeringLTD has a trailing yield of 0.7% on the current stock price of CN¥3.32. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Chengdu Road & Bridge EngineeringLTD

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Chengdu Road & Bridge EngineeringLTD reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Chengdu Road & Bridge EngineeringLTD didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Over the last year, it paid out more than three-quarters (89%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

Click here to see how much of its profit Chengdu Road & Bridge EngineeringLTD paid out over the last 12 months.

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. If earnings fall far enough, the company could be forced to cut its dividend. Chengdu Road & Bridge EngineeringLTD was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Chengdu Road & Bridge EngineeringLTD has seen its dividend decline 12% per annum on average over the past 10 years, which is not great to see.

Remember, you can always get a snapshot of Chengdu Road & Bridge EngineeringLTD's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Chengdu Road & Bridge EngineeringLTD worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not that we think Chengdu Road & Bridge EngineeringLTD is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in Chengdu Road & Bridge EngineeringLTD and want to know more, you'll find it very useful to know what risks this stock faces. We've identified 3 warning signs with Chengdu Road & Bridge EngineeringLTD (at least 2 which shouldn't be ignored), and understanding them should be part of your investment process.

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.