It looks like Anchun International Holdings Ltd. (SGX:BTX) is about to go ex-dividend in the next four 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Anchun International Holdings investors that purchase the stock on or after the 2nd of May will not receive the dividend, which will be paid on the 24th of May.

The company's next dividend payment will be CN¥0.12 per share, on the back of last year when the company paid a total of CN¥0.12 to shareholders. Based on the last year's worth of payments, Anchun International Holdings stock has a trailing yield of around 7.2% on the current share price of SGD0.32. If you buy this business for its dividend, you should have an idea of whether Anchun International Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Anchun International Holdings

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. Anchun International Holdings paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

Click here to see how much of its profit Anchun International Holdings paid out over the last 12 months.

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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see Anchun International Holdings has grown its earnings rapidly, up 47% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Anchun International Holdings looks like a promising growth company.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Anchun International Holdings dividends are largely the same as they were three years ago.

Final Takeaway

Should investors buy Anchun International Holdings for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Anchun International Holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Anchun International Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Anchun International Holdings is showing 3 warning signs in our investment analysis, and 1 of those is potentially serious...

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.