Shanghai Baosight Software Co.,Ltd. (SHSE:600845) Is About To Go Ex-Dividend, And It Pays A 2.4% Yield

Shanghai Baosight Software Co.,Ltd. (SHSE:600845) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. This means that investors who purchase Shanghai Baosight SoftwareLtd's shares on or after the 12th of June will not receive the dividend, which will be paid on the 12th of June.

The company's upcoming dividend is CN¥1.00 a share, following on from the last 12 months, when the company distributed a total of CN¥1.00 per share to shareholders. Last year's total dividend payments show that Shanghai Baosight SoftwareLtd has a trailing yield of 2.4% on the current share price of CN¥41.28. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Shanghai Baosight SoftwareLtd

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. It paid out 89% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. A useful secondary check can be to evaluate whether Shanghai Baosight SoftwareLtd generated enough free cash flow to afford its dividend. Over the last year it paid out 73% of its free cash flow as dividends, within the usual range for most companies.

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?

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. It's encouraging to see Shanghai Baosight SoftwareLtd has grown its earnings rapidly, up 40% a year for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Shanghai Baosight SoftwareLtd has lifted its dividend by approximately 36% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Has Shanghai Baosight SoftwareLtd got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Shanghai Baosight SoftwareLtd's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 89% and 73% respectively. Overall, it's hard to get excited about Shanghai Baosight SoftwareLtd from a dividend perspective.

While it's tempting to invest in Shanghai Baosight SoftwareLtd for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Shanghai Baosight SoftwareLtd that you should be aware of before investing in their 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.