Beijing United Information Technology Co.,Ltd. (SHSE:603613) Looks Interesting, And It's About To Pay A Dividend

Beijing United Information Technology Co.,Ltd. (SHSE:603613) is about to trade ex-dividend in the next 2 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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 Beijing United Information TechnologyLtd's shares before the 18th of July to receive the dividend, which will be paid on the 18th of July.

The company's next dividend payment will be CN¥0.213 per share, on the back of last year when the company paid a total of CN¥0.21 to shareholders. Last year's total dividend payments show that Beijing United Information TechnologyLtd has a trailing yield of 1.2% on the current share price of CN¥18.49. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Beijing United Information TechnologyLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Beijing United Information TechnologyLtd paid out just 10% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 62% of its free cash flow as dividends, within the usual range for most companies.

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 how much of its profit Beijing United Information TechnologyLtd paid out over the last 12 months.

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. That's why it's comforting to see Beijing United Information TechnologyLtd's earnings have been skyrocketing, up 59% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last four years, Beijing United Information TechnologyLtd has lifted its dividend by approximately 69% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

From a dividend perspective, should investors buy or avoid Beijing United Information TechnologyLtd? Earnings per share have grown at a nice rate in recent times and over the last year, Beijing United Information TechnologyLtd paid out less than half its earnings and a bit over half its free cash flow. Beijing United Information TechnologyLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Beijing United Information TechnologyLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for Beijing United Information TechnologyLtd (of which 1 is potentially serious!) 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.

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