Is It Smart To Buy Suntar Environmental Technology Co., Ltd. (SHSE:688101) Before It Goes Ex-Dividend?

Readers hoping to buy Suntar Environmental Technology Co., Ltd. (SHSE:688101) 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. 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. Thus, you can purchase Suntar Environmental Technology's shares before the 5th of July in order to receive the dividend, which the company will pay on the 5th of July.

The company's next dividend payment will be CN¥0.23 per share, and in the last 12 months, the company paid a total of CN¥0.23 per share. Last year's total dividend payments show that Suntar Environmental Technology has a trailing yield of 2.0% on the current share price of CN¥11.56. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Suntar Environmental Technology

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. That's why it's good to see Suntar Environmental Technology paying out a modest 28% of its earnings. A useful secondary check can be to evaluate whether Suntar Environmental Technology generated enough free cash flow to afford its dividend. It paid out 4.4% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Suntar Environmental 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 how much of its profit Suntar Environmental Technology 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Suntar Environmental Technology, with earnings per share up 2.6% on average over the last five years. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Suntar Environmental Technology's dividend payments per share have declined at 2.1% per year on average over the past four years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Should investors buy Suntar Environmental Technology for the upcoming dividend? Earnings per share have been growing moderately, and Suntar Environmental Technology is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Suntar Environmental Technology is halfway there. It's a promising combination that should mark this company worthy of closer attention.

So while Suntar Environmental Technology 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 Suntar Environmental Technology (of which 1 can't be ignored!) you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.

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