Chengdu Expressway Co., Ltd. (HKG:1785) is set to trade ex-dividend in the coming days. Typically, the ex-dividend date is one business day before the record date which is the date a company determines which shareholders are eligible to receive a dividend. It is important to know the ex-dividend date, because any trade in the stock must have settled by the record date. Therefore, if you buy shares of Chengdu Expressway on or after May 17, you will not be able to receive the dividend when it is paid on July 12.
The company’s next dividend payment will be CN¥0.14 per share, and in the past 12 months, the company has paid a total of CN¥0.14 per share. Calculating the value of last year’s payments shows that Chengdu Expressway has a yield of 7.9% on the current share price of HK$2.06. Dividends contribute greatly to investment returns for long-term holders, but only if the dividend continues to be paid. We need to see if the dividend is covered by earnings and if it increases.
Check out our latest analysis for Chengdu Expressway
If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. That’s why it’s good to see Chengdu Expressway paying a modest 38% of its revenue. Still, cash flow is even more important than earnings in evaluating a dividend, so we need to see if the company has generated enough cash to pay its distribution. It distributed 45% of its free cash flow as dividends, a comfortable level of distribution for most companies.
It is positive to see that Chengdu Expressway’s dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher margin security before the dividend is reduced.
Click here to see how much profit Chengdu Expressway has paid out in the past 12 months.
Have earnings and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it is easier to increase the dividend when earnings increase. Investors love dividends, so if earnings fall and the dividend is cut, expect a stock to sell heavily at the same time. That’s why it’s a relief to see that Chengdu Expressway’s earnings per share have grown 9.8% annually over the past five years. The company keeps more than half of its profits within the company, and it has grown its profits at a decent rate. Organizations that reinvest heavily in themselves generally grow stronger over time, which can bring attractive benefits such as higher profits and dividends.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past three years, Chengdu Expressway has increased its dividend by about 2.7% per year on average. We are pleased to see dividends increasing alongside earnings over several years, which may be a sign that the company intends to share the growth with shareholders.
Is Chengdu Expressway Worth Buying for Its Dividend? Earnings per share rose moderately and Chengdu Expressway pays out less than half of its earnings and cash flow as dividends, which is an interesting combination as it suggests the company is investing in growth. It might be nice to see profits growing faster, but Chengdu Expressway is cautious with its dividend payouts and could still perform reasonably well in the long run. Overall, we think this is an attractive combination and worthy of further research.
Although it is tempting to invest in Chengdu Expressway just for the dividends, you should always be aware of the risks involved. To help you, we found 1 warning sign for Chengdu Expressway which you should be aware of before investing in their stocks.
If you are looking for good dividend payers, we recommend by consulting our selection of the best dividend-paying stocks.
Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.