Jiangsu Gian Technology Co., Ltd. (SZSE:300709) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Jiangsu Gian Technology Co., Ltd. (SZSE:300709) 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. This means that investors who purchase Jiangsu Gian Technology's shares on or after the 28th of May will not receive the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be CN¥0.16 per share, and in the last 12 months, the company paid a total of CN¥0.16 per share. Looking at the last 12 months of distributions, Jiangsu Gian Technology has a trailing yield of approximately 0.6% on its current stock price of CN¥28.56. If you buy this business for its dividend, you should have an idea of whether Jiangsu Gian Technology's dividend is reliable and sustainable. So we need to investigate whether Jiangsu Gian Technology can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Jiangsu Gian Technology

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. Jiangsu Gian Technology paid out just 16% 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. It paid out 6.6% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Jiangsu Gian Technology's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Jiangsu Gian Technology's earnings have been skyrocketing, up 34% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Jiangsu Gian Technology looks like a promising growth company.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Jiangsu Gian Technology has seen its dividend decline 8.5% per annum on average over the past six years, which is not great to see. Jiangsu Gian Technology is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Has Jiangsu Gian Technology got what it takes to maintain its dividend payments? Jiangsu Gian Technology has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past six years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Jiangsu Gian Technology for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Jiangsu Gian Technology you should know about.

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.