Richinfo Technology (SZSE:300634) Could Be A Buy For Its Upcoming Dividend

Richinfo Technology Co., Ltd. (SZSE:300634) 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Richinfo Technology's shares before the 17th of June to receive the dividend, which will be paid on the 17th of June.

The company's next dividend payment will be CN¥0.168 per share, and in the last 12 months, the company paid a total of CN¥0.17 per share. Looking at the last 12 months of distributions, Richinfo Technology has a trailing yield of approximately 1.0% on its current stock price of CN¥17.56. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Richinfo 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. Richinfo Technology paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 46% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Richinfo 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, Richinfo Technology's earnings per share have been growing at 14% 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, five years ago, Richinfo Technology has lifted its dividend by approximately 16% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy Richinfo Technology for the upcoming dividend? Richinfo Technology has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past five years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Richinfo Technology, and we would prioritise taking a closer look at it.

In light of that, while Richinfo Technology has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 2 warning signs for Richinfo Technology you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.