Tianneng Battery Group Co., Ltd. (SHSE:688819) is about to trade ex-dividend in the next 2 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Tianneng Battery Group's shares before the 19th of June to receive the dividend, which will be paid on the 19th of June.

The company's upcoming dividend is CN¥0.65003 a share, following on from the last 12 months, when the company distributed a total of CN¥0.65 per share to shareholders. Based on the last year's worth of payments, Tianneng Battery Group has a trailing yield of 2.5% on the current stock price of CN¥26.39. If you buy this business for its dividend, you should have an idea of whether Tianneng Battery Group's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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. Tianneng Battery Group paid out a comfortable 29% of its profit last year. 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 more than half (71%) of its free cash flow in the past year, which is within an average range for most companies.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Tianneng Battery Group earnings per share are up 2.7% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last three years, Tianneng Battery Group has lifted its dividend by approximately 2.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Tianneng Battery Group for the upcoming dividend? Earnings per share growth has been modest, and it's interesting that Tianneng Battery Group is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. In summary, it's hard to get excited about Tianneng Battery Group from a dividend perspective.

In light of that, while Tianneng Battery Group has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Tianneng Battery Group and you should be aware of these before buying any shares.

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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