Sunyard Technology Co.,Ltd (SHSE:600571) Stock Goes Ex-Dividend In Just Four Days

Readers hoping to buy Sunyard Technology Co.,Ltd (SHSE:600571) 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Sunyard TechnologyLtd's shares on or after the 29th of July, you won't be eligible to receive the dividend, when it is paid on the 29th of July.

The company's next dividend payment will be CN¥0.26 per share. Last year, in total, the company distributed CN¥0.26 to shareholders. Based on the last year's worth of payments, Sunyard TechnologyLtd has a trailing yield of 2.8% on the current stock price of CN¥9.31. 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! As a result, readers should always check whether Sunyard TechnologyLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Sunyard TechnologyLtd

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. Sunyard TechnologyLtd distributed an unsustainably high 168% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether Sunyard TechnologyLtd generated enough free cash flow to afford its dividend.

It's good to see that while Sunyard TechnologyLtd's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see how much of its profit Sunyard TechnologyLtd 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. Fortunately for readers, Sunyard TechnologyLtd's earnings per share have been growing at 20% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Sunyard TechnologyLtd has increased its dividend at approximately 14% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Sunyard TechnologyLtd? While it's nice to see earnings per share growing, we're curious about how Sunyard TechnologyLtd intends to continue growing, or maintain the dividend in a downturn given that it's paying out such a high percentage of its earnings and cashflow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Sunyard TechnologyLtd.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Sunyard TechnologyLtd. Case in point: We've spotted 3 warning signs for Sunyard TechnologyLtd you should be aware of.

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.

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