Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Cofco Sugar Holding CO.,LTD. (SHSE:600737) is about to go ex-dividend in just two 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Cofco Sugar HoldingLTD's shares before the 7th of November to receive the dividend, which will be paid on the 7th of November.

The company's next dividend payment will be CN¥0.20 per share. Last year, in total, the company distributed CN¥0.87 to shareholders. Based on the last year's worth of payments, Cofco Sugar HoldingLTD has a trailing yield of 8.9% on the current stock price of CN¥9.78. If you buy this business for its dividend, you should have an idea of whether Cofco Sugar HoldingLTD's dividend is reliable and sustainable. As a result, readers should always check whether Cofco Sugar HoldingLTD has been able to grow its dividends, or if the dividend might be cut.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Cofco Sugar HoldingLTD paid out 99% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. A useful secondary check can be to evaluate whether Cofco Sugar HoldingLTD generated enough free cash flow to afford its dividend. It paid out more than half (73%) of its free cash flow in the past year, which is within an average range for most companies.

It's good to see that while Cofco Sugar HoldingLTD's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

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. It's encouraging to see Cofco Sugar HoldingLTD has grown its earnings rapidly, up 28% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Cofco Sugar HoldingLTD has lifted its dividend by approximately 40% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy Cofco Sugar HoldingLTD for the upcoming dividend? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. In summary, while it has some positive characteristics, we're not inclined to race out and buy Cofco Sugar HoldingLTD today.

If you want to look further into Cofco Sugar HoldingLTD, it's worth knowing the risks this business faces. For example - Cofco Sugar HoldingLTD has 1 warning sign we think 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.

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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.