Why You Might Be Interested In Jiangsu Tongda Power Technology Co.,Ltd. (SZSE:002576) 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 Jiangsu Tongda Power Technology Co.,Ltd. (SZSE:002576) is about to go ex-dividend in just 3 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 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. This means that investors who purchase Jiangsu Tongda Power TechnologyLtd's shares on or after the 13th of June will not receive the dividend, which will be paid on the 13th of June.

The company's next dividend payment will be CN¥0.055 per share, and in the last 12 months, the company paid a total of CN¥0.055 per share. Calculating the last year's worth of payments shows that Jiangsu Tongda Power TechnologyLtd has a trailing yield of 0.5% on the current share price of CN¥11.54. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Jiangsu Tongda Power TechnologyLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for Jiangsu Tongda Power 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. Jiangsu Tongda Power TechnologyLtd has a low and conservative payout ratio of just 12% of its income after tax. A useful secondary check can be to evaluate whether Jiangsu Tongda Power TechnologyLtd generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 2.5% of its cash flow last year.

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 Jiangsu Tongda Power 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Jiangsu Tongda Power TechnologyLtd's earnings have been skyrocketing, up 31% per annum for the past five years. Jiangsu Tongda Power TechnologyLtd looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Jiangsu Tongda Power TechnologyLtd has lifted its dividend by approximately 6.2% 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.

Final Takeaway

Is Jiangsu Tongda Power TechnologyLtd worth buying for its dividend? It's great that Jiangsu Tongda Power TechnologyLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Jiangsu Tongda Power TechnologyLtd, and we would prioritise taking a closer look at it.

Want to learn more about Jiangsu Tongda Power TechnologyLtd? Here's a visualisation of its historical rate of revenue and earnings growth.

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.