Southwest Securities Co., Ltd. (SHSE:600369) Passed Our Checks, And It's About To Pay A CN¥0.01 Dividend

It looks like Southwest Securities Co., Ltd. (SHSE:600369) is about to go ex-dividend in the next 2 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Southwest Securities' shares before the 5th of December in order to receive the dividend, which the company will pay on the 5th of December.

The company's upcoming dividend is CN¥0.01 a share, following on from the last 12 months, when the company distributed a total of CN¥0.02 per share to shareholders. Based on the last year's worth of payments, Southwest Securities has a trailing yield of 0.4% on the current stock price of CN¥4.92. 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 Southwest Securities can afford its dividend, and if the dividend could grow.

See our latest analysis for Southwest Securities

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Southwest Securities paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies.

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?

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Southwest Securities's earnings per share have been growing at 14% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Southwest Securities's dividend payments per share have declined at 10% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

From a dividend perspective, should investors buy or avoid Southwest Securities? Earnings per share are growing nicely, and Southwest Securities is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Overall, Southwest Securities looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Curious what other investors think of Southwest Securities? 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.

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

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.