Readers hoping to buy Changbai Mountain Tourism Co., Ltd. (SHSE:603099) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Meaning, you will need to purchase Changbai Mountain Tourism's shares before the 17th of May to receive the dividend, which will be paid on the 17th of May.

The company's next dividend payment will be CN¥0.078 per share. Last year, in total, the company distributed CN¥0.078 to shareholders. Calculating the last year's worth of payments shows that Changbai Mountain Tourism has a trailing yield of 0.4% on the current share price of CN¥21.38. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Changbai Mountain Tourism has a low and conservative payout ratio of just 14% of its income after tax. A useful secondary check can be to evaluate whether Changbai Mountain Tourism generated enough free cash flow to afford its dividend. The good news is it paid out just 2.4% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Changbai Mountain Tourism's earnings per share have been growing at 18% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Changbai Mountain Tourism has seen its dividend decline 1.6% per annum on average over the past nine years, which is not great to see.

To Sum It Up

Is Changbai Mountain Tourism an attractive dividend stock, or better left on the shelf? Changbai Mountain Tourism has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Changbai Mountain Tourism is facing. To help with this, we've discovered 1 warning sign for Changbai Mountain Tourism that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.