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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Hebei Yichen Industrial Group Corporation Limited (HKG:1596) is about to go ex-dividend in just 3 days. Ex-dividend means that investors that purchase the stock on or after the 2nd of August will not receive this dividend, which will be paid on the 20th of September.
Hebei Yichen Industrial Group's next dividend payment will be CN¥0.078 per share, and in the last 12 months, the company paid a total of CN¥0.078 per share. Last year's total dividend payments show that Hebei Yichen Industrial Group has a trailing yield of 2.9% on the current share price of HK$3.09. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Hebei Yichen Industrial Group can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Hebei Yichen Industrial Group
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Hebei Yichen Industrial Group paid out a comfortable 39% of its profit last year. 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. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Hebei Yichen Industrial Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Hebei Yichen Industrial Group paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Hebei Yichen Industrial Group's earnings per share have risen 15% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.