Here's What We Like About China Merchants Securities' (SHSE:600999) Upcoming Dividend

It looks like China Merchants Securities Co., Ltd. (SHSE:600999) is about to go ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase China Merchants Securities' shares on or after the 16th of July, you won't be eligible to receive the dividend, when it is paid on the 16th of July.

The company's next dividend payment will be CN¥0.252 per share. Last year, in total, the company distributed CN¥0.25 to shareholders. Last year's total dividend payments show that China Merchants Securities has a trailing yield of 1.8% on the current share price of CN¥14.13. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for China Merchants Securities

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see China Merchants Securities paying out a modest 27% of its earnings.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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, China Merchants Securities's earnings per share have been growing at 11% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. China Merchants Securities has delivered 5.9% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because China Merchants Securities is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid China Merchants Securities? 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. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, China Merchants Securities looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

On that note, you'll want to research what risks China Merchants Securities is facing. For example, we've found 1 warning sign for China Merchants Securities that we recommend you consider before investing in the business.

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