Is It Worth Considering Acter Technology Integration Group Co., Ltd. (SHSE:603163) For Its Upcoming Dividend?

Acter Technology Integration Group Co., Ltd. (SHSE:603163) is about to trade ex-dividend in the next 2 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Acter Technology Integration Group investors that purchase the stock on or after the 14th of June will not receive the dividend, which will be paid on the 14th of June.

The company's next dividend payment will be CN¥0.80 per share. Last year, in total, the company distributed CN¥0.80 to shareholders. Looking at the last 12 months of distributions, Acter Technology Integration Group has a trailing yield of approximately 2.9% on its current stock price of CN¥27.84. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Acter Technology Integration Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Acter Technology Integration 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. Acter Technology Integration Group paid out 66% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Acter Technology Integration Group generated enough free cash flow to afford its dividend. Dividends consumed 62% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Acter Technology Integration Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Acter Technology Integration Group, with earnings per share up 3.4% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Unfortunately Acter Technology Integration Group has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Has Acter Technology Integration Group got what it takes to maintain its dividend payments? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that being said, if dividends aren't your biggest concern with Acter Technology Integration Group, you should know about the other risks facing this business. Every company has risks, and we've spotted 1 warning sign for Acter Technology Integration Group you should know about.

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.