Be Sure To Check Out Bank of Shanghai Co., Ltd. (SHSE:601229) Before It Goes Ex-Dividend

Readers hoping to buy Bank of Shanghai Co., Ltd. (SHSE:601229) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Therefore, if you purchase Bank of Shanghai's shares on or after the 28th of November, you won't be eligible to receive the dividend, when it is paid on the 28th of November.

The company's next dividend payment will be CN¥0.28 per share. Last year, in total, the company distributed CN¥0.56 to shareholders. Looking at the last 12 months of distributions, Bank of Shanghai has a trailing yield of approximately 6.9% on its current stock price of CN¥8.14. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Bank of Shanghai can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Bank of Shanghai

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 Shanghai's payout ratio is modest, at just 48% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Bank of Shanghai earnings per share are up 5.3% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bank of Shanghai has delivered 15% dividend growth per year on average over the past seven years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Bank of Shanghai worth buying for its dividend? Bank of Shanghai has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Bank of Shanghai looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Curious what other investors think of Bank of Shanghai? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.