Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ruida Futures Co.,Ltd. (SZSE:002961) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Ruida FuturesLtd's shares before the 11th of November to receive the dividend, which will be paid on the 11th of November.

The company's next dividend payment will be CN¥0.13 per share. Last year, in total, the company distributed CN¥0.22 to shareholders. Last year's total dividend payments show that Ruida FuturesLtd has a trailing yield of 1.3% on the current share price of CN¥17.24. 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 Ruida FuturesLtd paying out a modest 29% of its earnings.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Ruida FuturesLtd's earnings have been skyrocketing, up 21% per annum 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. Ruida FuturesLtd has delivered an average of 4.1% per year annual increase in its dividend, based on the past five years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Ruida FuturesLtd is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid Ruida FuturesLtd? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Ruida FuturesLtd looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

On that note, you'll want to research what risks Ruida FuturesLtd is facing. Every company has risks, and we've spotted 1 warning sign for Ruida FuturesLtd you should know about.

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.