Hithink RoyalFlush Information Network Co., Ltd. (SZSE:300033) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Hithink RoyalFlush Information Network's shares before the 29th of March to receive the dividend, which will be paid on the 29th of March.

The company's next dividend payment will be CN¥2.20 per share, on the back of last year when the company paid a total of CN¥2.20 to shareholders. Based on the last year's worth of payments, Hithink RoyalFlush Information Network stock has a trailing yield of around 1.5% on the current share price of CN¥143.78. If you buy this business for its dividend, you should have an idea of whether Hithink RoyalFlush Information Network'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. It paid out 84% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Hithink RoyalFlush Information Network's earnings per share have been growing at 17% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Hithink RoyalFlush Information Network has lifted its dividend by approximately 65% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

From a dividend perspective, should investors buy or avoid Hithink RoyalFlush Information Network? Earnings per share are growing at an attractive rate, and Hithink RoyalFlush Information Network is paying out a bit over half its profits. In summary, Hithink RoyalFlush Information Network appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Hithink RoyalFlush Information Network has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Hithink RoyalFlush Information Network that you should be aware of before investing in their shares.

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

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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.