Be Sure To Check Out Hangzhou Todaytec Digital Co., Ltd (SZSE:300743) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Hangzhou Todaytec Digital Co., Ltd (SZSE:300743) is about to go ex-dividend in just three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. In other words, investors can purchase Hangzhou Todaytec Digital's shares before the 14th of June in order to be eligible for the dividend, which will be paid on the 14th of June.

The company's next dividend payment will be CN¥0.35 per share. Last year, in total, the company distributed CN¥0.35 to shareholders. Looking at the last 12 months of distributions, Hangzhou Todaytec Digital has a trailing yield of approximately 2.8% on its current stock price of CN¥12.32. If you buy this business for its dividend, you should have an idea of whether Hangzhou Todaytec Digital's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Hangzhou Todaytec Digital

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hangzhou Todaytec Digital is paying out an acceptable 74% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 45% 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 how much of its profit Hangzhou Todaytec Digital 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. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Hangzhou Todaytec Digital's earnings per share have risen 12% per annum over the last five years. Hangzhou Todaytec Digital is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hangzhou Todaytec Digital has delivered an average of 11% per year annual increase in its dividend, based on the past six years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is Hangzhou Todaytec Digital worth buying for its dividend? We like Hangzhou Todaytec Digital's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

So while Hangzhou Todaytec Digital looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 3 warning signs for Hangzhou Todaytec Digital and you should be aware of them before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.