Is It Smart To Buy Hunan Sundy Science and Technology Co., Ltd. (SZSE:300515) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hunan Sundy Science and Technology Co., Ltd. (SZSE:300515) is about to trade ex-dividend in the next 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Hunan Sundy Science and Technology investors that purchase the stock on or after the 30th of May will not receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be CN¥0.145 per share. Last year, in total, the company distributed CN¥0.14 to shareholders. Last year's total dividend payments show that Hunan Sundy Science and Technology has a trailing yield of 1.4% on the current share price of CN¥10.23. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Hunan Sundy Science and Technology

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. Hunan Sundy Science and Technology paid out 52% of its earnings to investors last year, a normal payout level for most businesses. 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 29% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Hunan Sundy Science and 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 how much of its profit Hunan Sundy Science and Technology 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, Hunan Sundy Science and Technology's earnings per share have been growing at 10% a year for the past five years. Hunan Sundy Science and Technology has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

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, seven years ago, Hunan Sundy Science and Technology has lifted its dividend by approximately 5.5% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Hunan Sundy Science and Technology is keeping back more of its profits to grow the business.

Final Takeaway

Is Hunan Sundy Science and Technology worth buying for its dividend? Hunan Sundy Science and Technology's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Hunan Sundy Science and Technology has 2 warning signs we think 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.