East Group Co.,Ltd (SZSE:300376) is about to trade ex-dividend in the next 2 days. 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 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. Meaning, you will need to purchase East GroupLtd's shares before the 17th of July to receive the dividend, which will be paid on the 17th of July.

The company's upcoming dividend is CN¥0.049 a share, following on from the last 12 months, when the company distributed a total of CN¥0.049 per share to shareholders. Calculating the last year's worth of payments shows that East GroupLtd has a trailing yield of 2.1% on the current share price of CN¥2.29. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether East GroupLtd 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. East GroupLtd has a low and conservative payout ratio of just 23% of its income after tax. A useful secondary check can be to evaluate whether East GroupLtd generated enough free cash flow to afford its dividend. It paid out 92% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

East GroupLtd paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to East GroupLtd's ability to maintain its dividend.

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

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. So we're not too excited that East GroupLtd's earnings are down 2.2% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, East GroupLtd has lifted its dividend by approximately 11% a year on average.

To Sum It Up

Is East GroupLtd an attractive dividend stock, or better left on the shelf? East GroupLtd's earnings per share have fallen noticeably and, although it paid out less than half its profit as dividends last year, it paid out a disconcertingly high percentage of its cashflow, which is not a great combination. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that in mind though, if the poor dividend characteristics of East GroupLtd don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 2 warning signs for East GroupLtd that we recommend you consider before investing in the business.

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.

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