Four Days Left Until Bank of Communications Co., Ltd. (HKG:3328) Trades Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bank of Communications Co., Ltd. (HKG:3328) is about to trade ex-dividend in the next 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. Therefore, if you purchase Bank of Communications' shares on or after the 17th of December, you won't be eligible to receive the dividend, when it is paid on the 28th of January.

The company's upcoming dividend is CN¥0.1563 a share, following on from the last 12 months, when the company distributed a total of CN¥0.39 per share to shareholders. Based on the last year's worth of payments, Bank of Communications stock has a trailing yield of around 6.0% on the current share price of HK$7.12. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Bank of Communications's payout ratio is modest, at just 48% of profit.

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.

Check out our latest analysis for Bank of Communications

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. With that in mind, we're not enthused to see that Bank of Communications's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

We'd also point out that Bank of Communications issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Bank of Communications has lifted its dividend by approximately 3.7% a year on average.

Final Takeaway

Has Bank of Communications got what it takes to maintain its dividend payments? Bank of Communications's earnings per share are basically flat over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

So if you want to do more digging on Bank of Communications, you'll find it worthwhile knowing the risks that this stock faces. In terms of investment risks, we've identified 1 warning sign with Bank of Communications and understanding them should be part of your investment process.

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.