Should You Buy Jack Technology Co.,Ltd (SHSE:603337) For Its Upcoming Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Jack Technology Co.,Ltd (SHSE:603337) is about to go ex-dividend in just 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 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. In other words, investors can purchase Jack TechnologyLtd's shares before the 9th of July in order to be eligible for the dividend, which will be paid on the 9th of July.

The company's next dividend payment will be CN¥0.50 per share, on the back of last year when the company paid a total of CN¥0.50 to shareholders. Based on the last year's worth of payments, Jack TechnologyLtd has a trailing yield of 1.9% on the current stock price of CN¥25.83. If you buy this business for its dividend, you should have an idea of whether Jack TechnologyLtd's dividend is reliable and sustainable. As a result, readers should always check whether Jack TechnologyLtd has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Jack TechnologyLtd

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. Jack TechnologyLtd paid out a comfortable 38% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 18% of its free cash flow as dividends last year, which is conservatively low.

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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Jack TechnologyLtd, with earnings per share up 5.3% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, seven years ago, Jack TechnologyLtd has lifted its dividend by approximately 18% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Jack TechnologyLtd an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Jack TechnologyLtd is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Jack TechnologyLtd is halfway there. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Jack TechnologyLtd is facing. In terms of investment risks, we've identified 1 warning sign with Jack TechnologyLtd and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com