Micro-Tech (Nanjing) Co.,Ltd (SHSE:688029) Passed Our Checks, And It's About To Pay A CN¥0.50 Dividend

Micro-Tech (Nanjing) Co.,Ltd (SHSE:688029) is about to trade ex-dividend in the next three days. 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 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. Therefore, if you purchase Micro-Tech (Nanjing)Ltd's shares on or after the 11th of October, you won't be eligible to receive the dividend, when it is paid on the 11th of October.

The company's next dividend payment will be CN¥0.50 per share, on the back of last year when the company paid a total of CN¥1.00 to shareholders. Looking at the last 12 months of distributions, Micro-Tech (Nanjing)Ltd has a trailing yield of approximately 1.3% on its current stock price of CN¥76.60. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

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

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. Micro-Tech (Nanjing)Ltd paid out 53% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Micro-Tech (Nanjing)Ltd generated enough free cash flow to afford its dividend. Dividends consumed 64% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 16% per annum over the last five years. Micro-Tech (Nanjing)Ltd has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last five years, Micro-Tech (Nanjing)Ltd has lifted its dividend by approximately 7.0% 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.

To Sum It Up

Is Micro-Tech (Nanjing)Ltd worth buying for its dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Micro-Tech (Nanjing)Ltd's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 53% and 64% respectively. In summary, while it has some positive characteristics, we're not inclined to race out and buy Micro-Tech (Nanjing)Ltd today.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for Micro-Tech (Nanjing)Ltd that you should be aware of before investing in their shares.

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.