Bank of Changsha Co., Ltd. (SHSE:601577) stock is about to trade ex-dividend in 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Bank of Changsha's shares on or after the 16th of July, you won't be eligible to receive the dividend, when it is paid on the 16th of July.

The company's next dividend payment will be CN¥0.38 per share, and in the last 12 months, the company paid a total of CN¥0.38 per share. Based on the last year's worth of payments, Bank of Changsha has a trailing yield of 4.7% on the current stock price of CN¥8.01. If you buy this business for its dividend, you should have an idea of whether Bank of Changsha's dividend is reliable and sustainable. As a result, readers should always check whether Bank of Changsha has been able to grow its dividends, or if the dividend might be cut.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Bank of Changsha paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Bank of Changsha, with earnings per share up 5.8% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bank of Changsha has delivered 6.3% dividend growth per year on average over the past five years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has Bank of Changsha got what it takes to maintain its dividend payments? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Bank of Changsha ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Bank of Changsha for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Bank of Changsha 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.

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