Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see BOCOM International Holdings Company Limited (HKG:3329) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. Meaning, you will need to purchase BOCOM International Holdings' shares before the 5th of July to receive the dividend, which will be paid on the 18th of July.

The company's next dividend payment will be HK$0.05 per share, on the back of last year when the company paid a total of HK$0.05 to shareholders. Based on the last year's worth of payments, BOCOM International Holdings stock has a trailing yield of around 6.0% on the current share price of HK$0.84. If you buy this business for its dividend, you should have an idea of whether BOCOM International Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for BOCOM International Holdings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. BOCOM International Holdings paid out more than half (52%) 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 how much of its profit BOCOM International Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by BOCOM International Holdings's 11% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. BOCOM International Holdings has seen its dividend decline 11% per annum on average over the past four years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Is BOCOM International Holdings worth buying for its dividend? We're not overly enthused to see BOCOM International Holdings's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

With that being said, if you're still considering BOCOM International Holdings as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 4 warning signs for BOCOM International Holdings (1 can't be ignored!) that you ought to be aware of before buying the shares.

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.