Here's What We Like About Qilu Bank's (SHSE:601665) Upcoming Dividend

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 Qilu Bank Co., Ltd. (SHSE:601665) is about to go ex-dividend in just three 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 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. Accordingly, Qilu Bank 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 upcoming dividend is CN¥0.22 a share, following on from the last 12 months, when the company distributed a total of CN¥0.22 per share to shareholders. Based on the last year's worth of payments, Qilu Bank stock has a trailing yield of around 4.3% on the current share price of CN¥5.08. 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.

See our latest analysis for Qilu Bank

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Qilu Bank has a low and conservative payout ratio of just 25% of its income after tax.

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. 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, Qilu Bank's earnings per share have been growing at 11% a year for the past five years.

Qilu Bank also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, three years ago, Qilu Bank has lifted its dividend by approximately 6.9% a year on average. 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

From a dividend perspective, should investors buy or avoid Qilu Bank? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Qilu Bank 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.

In light of that, while Qilu Bank has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with Qilu Bank and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com