Wuxi Rural Commercial Bank Co.,Ltd (SHSE:600908) Looks Interesting, And It's About To Pay A Dividend

It looks like Wuxi Rural Commercial Bank Co.,Ltd (SHSE:600908) is about to go ex-dividend in the next three 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. Accordingly, Wuxi Rural Commercial BankLtd investors that purchase the stock on or after the 5th of July will not receive the dividend, which will be paid on the 5th of July.

The company's next dividend payment will be CN¥0.20 per share, on the back of last year when the company paid a total of CN¥0.20 to shareholders. Calculating the last year's worth of payments shows that Wuxi Rural Commercial BankLtd has a trailing yield of 3.7% on the current share price of CN¥5.46. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Wuxi Rural Commercial BankLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for Wuxi Rural Commercial BankLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wuxi Rural Commercial BankLtd is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Wuxi Rural Commercial BankLtd's earnings per share have been growing at 11% a year for the past five years.

We'd also point out that Wuxi Rural Commercial BankLtd issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last seven years, Wuxi Rural Commercial BankLtd has lifted its dividend by approximately 4.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Wuxi Rural Commercial BankLtd is keeping back more of its profits to grow the business.

To Sum It Up

Is Wuxi Rural Commercial BankLtd an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Wuxi Rural Commercial BankLtd more closely.

In light of that, while Wuxi Rural Commercial BankLtd has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Wuxi Rural Commercial BankLtd that you should be aware of before investing in their shares.

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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