Hua Xia Bank Co., Limited (SHSE:600015) is about to trade ex-dividend in the next 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Hua Xia Bank's shares before the 21st of June in order to receive the dividend, which the company will pay on the 21st of June.

The company's upcoming dividend is CN¥0.384 a share, following on from the last 12 months, when the company distributed a total of CN¥0.38 per share to shareholders. Based on the last year's worth of payments, Hua Xia Bank stock has a trailing yield of around 5.9% on the current share price of CN¥6.53. If you buy this business for its dividend, you should have an idea of whether Hua Xia Bank's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hua Xia Bank has a low and conservative payout ratio of just 25% of its income after tax.

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 that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Hua Xia Bank's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

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, Hua Xia Bank has increased its dividend at approximately 4.3% a year on average.

To Sum It Up

Is Hua Xia Bank worth buying for its dividend? Hua Xia Bank's earnings per share have not grown at all in recent years, although we like that it is paying out a low percentage of its earnings. We're unconvinced on the company's merits, and think there might be better opportunities out there.

So if you want to do more digging on Hua Xia Bank, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 1 warning sign for Hua Xia Bank you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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