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 Zhejiang Changsheng Sliding Bearings Co., Ltd. (SZSE:300718) is about to go ex-dividend in just 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Zhejiang Changsheng Sliding Bearings' shares before the 17th of October in order to receive the dividend, which the company will pay on the 17th of October.

The company's next dividend payment will be CN¥0.168 per share. Last year, in total, the company distributed CN¥0.47 to shareholders. Last year's total dividend payments show that Zhejiang Changsheng Sliding Bearings has a trailing yield of 3.0% on the current share price of CN¥15.86. If you buy this business for its dividend, you should have an idea of whether Zhejiang Changsheng Sliding Bearings's dividend is reliable and sustainable. As a result, readers should always check whether Zhejiang Changsheng Sliding Bearings has been able to grow its dividends, or if the dividend might be cut.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Zhejiang Changsheng Sliding Bearings paid out more than half (50%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Zhejiang Changsheng Sliding Bearings generated enough free cash flow to afford its dividend. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Zhejiang Changsheng Sliding Bearings'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Zhejiang Changsheng Sliding Bearings's earnings per share have risen 10% per annum over the last five years. Zhejiang Changsheng Sliding Bearings is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, six years ago, Zhejiang Changsheng Sliding Bearings has lifted its dividend by approximately 25% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy Zhejiang Changsheng Sliding Bearings for the upcoming dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Zhejiang Changsheng Sliding Bearings's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 50% and 56% respectively. In summary, while it has some positive characteristics, we're not inclined to race out and buy Zhejiang Changsheng Sliding Bearings today.

While it's tempting to invest in Zhejiang Changsheng Sliding Bearings for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for Zhejiang Changsheng Sliding Bearings (1 is significant) you should be aware of.

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.