TKD Science and Technology Co.,Ltd. (SHSE:603738) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

TKD Science and Technology Co.,Ltd. (SHSE:603738) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. This means that investors who purchase TKD Science and TechnologyLtd's shares on or after the 24th of June will not receive the dividend, which will be paid on the 24th of June.

The company's next dividend payment will be CN¥0.081 per share, and in the last 12 months, the company paid a total of CN¥0.081 per share. Based on the last year's worth of payments, TKD Science and TechnologyLtd has a trailing yield of 0.6% on the current stock price of CN¥13.97. 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.

See our latest analysis for TKD Science and TechnologyLtd

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. TKD Science and TechnologyLtd paid out a comfortable 28% of its profit last year. A useful secondary check can be to evaluate whether TKD Science and TechnologyLtd generated enough free cash flow to afford its dividend. It paid out 78% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 TKD Science and TechnologyLtd paid out over the last 12 months.

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. It's encouraging to see TKD Science and TechnologyLtd has grown its earnings rapidly, up 20% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past seven years, TKD Science and TechnologyLtd has increased its dividend at approximately 2.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because TKD Science and TechnologyLtd is keeping back more of its profits to grow the business.

Final Takeaway

Has TKD Science and TechnologyLtd got what it takes to maintain its dividend payments? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in TKD Science and TechnologyLtd for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for TKD Science and TechnologyLtd that we recommend you consider before investing in the business.

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.

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