Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bright Smart Securities & Commodities Group Limited (HKG:1428) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Bright Smart Securities & Commodities Group's shares on or after the 23rd of August, you won't be eligible to receive the dividend, when it is paid on the 9th of September.

The company's upcoming dividend is HK$0.10 a share, following on from the last 12 months, when the company distributed a total of HK$0.10 per share to shareholders. Based on the last year's worth of payments, Bright Smart Securities & Commodities Group stock has a trailing yield of around 7.1% on the current share price of HK$1.4. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Bright Smart Securities & Commodities Group

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. Bright Smart Securities & Commodities Group paid out a comfortable 30% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Bright Smart Securities & Commodities Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Bright Smart Securities & Commodities Group's earnings per share have risen 16% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bright Smart Securities & Commodities Group has delivered an average of 19% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Should investors buy Bright Smart Securities & Commodities Group for the upcoming dividend? Companies like Bright Smart Securities & Commodities Group that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Bright Smart Securities & Commodities Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Bright Smart Securities & Commodities Group has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Bright Smart Securities & Commodities Group 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.