Is It Smart To Buy Micro-Tech (Nanjing) Co.,Ltd (SHSE:688029) Before It Goes Ex-Dividend?

Micro-Tech (Nanjing) Co.,Ltd (SHSE:688029) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Micro-Tech (Nanjing)Ltd's shares on or after the 24th of June, you won't be eligible to receive the dividend, when it is paid on the 24th of June.

The company's next dividend payment will be CN¥1.00 per share. Last year, in total, the company distributed CN¥1.00 to shareholders. Based on the last year's worth of payments, Micro-Tech (Nanjing)Ltd has a trailing yield of 1.6% on the current stock price of CN¥63.11. If you buy this business for its dividend, you should have an idea of whether Micro-Tech (Nanjing)Ltd's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Micro-Tech (Nanjing)Ltd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Micro-Tech (Nanjing)Ltd paid out a comfortable 36% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 40% of its free cash flow in the past 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 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Micro-Tech (Nanjing)Ltd's earnings per share have risen 15% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past four years, Micro-Tech (Nanjing)Ltd has increased its dividend at approximately 8.8% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Micro-Tech (Nanjing)Ltd worth buying for its dividend? It's great that Micro-Tech (Nanjing)Ltd 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. Micro-Tech (Nanjing)Ltd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Micro-Tech (Nanjing)Ltd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Micro-Tech (Nanjing)Ltd has 1 warning sign we think you should be aware of.

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.

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