Shanghai Mechanical & Electrical Industry Co.,Ltd. (SHSE:600835) Will Pay A CN¥0.20 Dividend In Two Days

Simply Wall St · 10/21 22:02

Shanghai Mechanical & Electrical Industry Co.,Ltd. (SHSE:600835) stock is about to trade ex-dividend in two 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Shanghai Mechanical & Electrical IndustryLtd's shares before the 24th of October in order to receive the dividend, which the company will pay on the 24th of October.

The company's next dividend payment will be CN¥0.20 per share, and in the last 12 months, the company paid a total of CN¥0.40 per share. Based on the last year's worth of payments, Shanghai Mechanical & Electrical IndustryLtd has a trailing yield of 2.7% on the current stock price of CN¥15.06. If you buy this business for its dividend, you should have an idea of whether Shanghai Mechanical & Electrical IndustryLtd's dividend is reliable and sustainable. As a result, readers should always check whether Shanghai Mechanical & Electrical IndustryLtd has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Shanghai Mechanical & Electrical IndustryLtd

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. Shanghai Mechanical & Electrical IndustryLtd paid out 68% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Shanghai Mechanical & Electrical IndustryLtd generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (83%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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.

historic-dividend
SHSE:600835 Historic Dividend October 21st 2024

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Shanghai Mechanical & Electrical IndustryLtd's 5.2% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Shanghai Mechanical & Electrical IndustryLtd has increased its dividend at approximately 3.6% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

Final Takeaway

Has Shanghai Mechanical & Electrical IndustryLtd got what it takes to maintain its dividend payments? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Shanghai Mechanical & Electrical IndustryLtd.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Shanghai Mechanical & Electrical IndustryLtd. Case in point: We've spotted 1 warning sign for Shanghai Mechanical & Electrical IndustryLtd you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.