Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see BTG Hotels (Group) Co., Ltd. (SHSE:600258) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase BTG Hotels (Group)'s shares before the 28th of June in order to receive the dividend, which the company will pay on the 28th of June.

The company's next dividend payment will be CN¥0.22 per share, on the back of last year when the company paid a total of CN¥0.22 to shareholders. Looking at the last 12 months of distributions, BTG Hotels (Group) has a trailing yield of approximately 1.7% on its current stock price of CN¥13.28. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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. That's why it's good to see BTG Hotels (Group) paying out a modest 29% of its earnings. A useful secondary check can be to evaluate whether BTG Hotels (Group) generated enough free cash flow to afford its dividend. The good news is it paid out just 13% of its free cash flow in the last year.

It's positive to see that BTG Hotels (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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see BTG Hotels (Group)'s earnings per share have been shrinking at 3.1% a year over the previous five years.

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, BTG Hotels (Group) has increased its dividend at approximately 2.4% a year on average.

Final Takeaway

Has BTG Hotels (Group) got what it takes to maintain its dividend payments? BTG Hotels (Group) has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of BTG Hotels (Group)'s dividend merits.

On that note, you'll want to research what risks BTG Hotels (Group) is facing. For example, we've found 1 warning sign for BTG Hotels (Group) that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com