China Shipbuilding Industry Group Power Co., Ltd. (SHSE:600482) is about to trade ex-dividend in the next 3 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 China Shipbuilding Industry Group Power's shares before the 8th of August to receive the dividend, which will be paid on the 8th of August.

The company's next dividend payment will be CN¥0.10641 per share, on the back of last year when the company paid a total of CN¥0.11 to shareholders. Calculating the last year's worth of payments shows that China Shipbuilding Industry Group Power has a trailing yield of 0.5% on the current share price of CN¥23.63. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether China Shipbuilding Industry Group Power can afford its dividend, and if the dividend could grow.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see China Shipbuilding Industry Group Power paying out a modest 28% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 6.1% of its free 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 how much of its profit China Shipbuilding Industry Group Power 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. China Shipbuilding Industry Group Power's earnings per share have fallen at approximately 13% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. China Shipbuilding Industry Group Power has delivered an average of 5.0% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Has China Shipbuilding Industry Group Power got what it takes to maintain its dividend payments? China Shipbuilding Industry Group Power has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it's hard to get excited about China Shipbuilding Industry Group Power from a dividend perspective.

Want to learn more about China Shipbuilding Industry Group Power's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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.

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