Is It Smart To Buy Weaver Network Technology Co., Ltd. (SHSE:603039) Before It Goes Ex-Dividend?

Readers hoping to buy Weaver Network Technology Co., Ltd. (SHSE:603039) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Weaver Network Technology's shares before the 4th of June to receive the dividend, which will be paid on the 4th of June.

The company's next dividend payment will be CN¥0.15 per share, on the back of last year when the company paid a total of CN¥0.15 to shareholders. Calculating the last year's worth of payments shows that Weaver Network Technology has a trailing yield of 0.4% on the current share price of CN¥35.25. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Weaver Network Technology has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Weaver Network Technology

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. Weaver Network Technology has a low and conservative payout ratio of just 19% of its income after tax. A useful secondary check can be to evaluate whether Weaver Network Technology generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 24% of its cash flow last year.

It's positive to see that Weaver Network Technology's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Weaver Network Technology's earnings per share have been growing at 12% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings 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. Weaver Network Technology has delivered 20% dividend growth per year on average over the past seven years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is Weaver Network Technology worth buying for its dividend? We love that Weaver Network Technology is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.

Wondering what the future holds for Weaver Network Technology? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.