Kuang-Chi Technologies Co., Ltd. (SZSE:002625) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Kuang-Chi Technologies Co., Ltd. (SZSE:002625) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Kuang-Chi Technologies' shares on or after the 17th of October, you won't be eligible to receive the dividend, when it is paid on the 17th of October.

The company's upcoming dividend is CN¥0.233 a share, following on from the last 12 months, when the company distributed a total of CN¥0.47 per share to shareholders. Last year's total dividend payments show that Kuang-Chi Technologies has a trailing yield of 1.7% on the current share price of CN¥28.07. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Kuang-Chi Technologies

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. It paid out 78% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.

Click here to see how much of its profit Kuang-Chi Technologies 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. It's encouraging to see Kuang-Chi Technologies has grown its earnings rapidly, up 58% a year 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 past 10 years, Kuang-Chi Technologies has increased its dividend at approximately 42% 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.

To Sum It Up

Is Kuang-Chi Technologies worth buying for its dividend? Kuang-Chi Technologies has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Kuang-Chi Technologies ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

In light of that, while Kuang-Chi Technologies has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Kuang-Chi Technologies that we strongly recommend you have a look at before investing in the company.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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

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.