Hangzhou Seck Intelligent Technology Co., Ltd. (SZSE:300897) Is About To Go Ex-Dividend, And It Pays A 1.3% Yield

Readers hoping to buy Hangzhou Seck Intelligent Technology Co., Ltd. (SZSE:300897) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Therefore, if you purchase Hangzhou Seck Intelligent Technology's shares on or after the 23rd of May, you won't be eligible to receive the dividend, when it is paid on the 23rd of May.

The company's next dividend payment will be CN¥0.40 per share, and in the last 12 months, the company paid a total of CN¥0.40 per share. Looking at the last 12 months of distributions, Hangzhou Seck Intelligent Technology has a trailing yield of approximately 1.3% on its current stock price of CN¥30.90. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Hangzhou Seck Intelligent Technology has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Hangzhou Seck Intelligent Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Hangzhou Seck Intelligent Technology paying out a modest 29% of its earnings. A useful secondary check can be to evaluate whether Hangzhou Seck Intelligent Technology generated enough free cash flow to afford its dividend. It paid out an unsustainably high 353% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Hangzhou Seck Intelligent Technology intends to continue funding this dividend, or if it could be forced to cut the payment.

While Hangzhou Seck Intelligent Technology's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Hangzhou Seck Intelligent Technology's ability to maintain its dividend.

Click here to see how much of its profit Hangzhou Seck Intelligent Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Hangzhou Seck Intelligent Technology, with earnings per share up 6.1% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hangzhou Seck Intelligent Technology has seen its dividend decline 13% per annum on average over the past three years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

From a dividend perspective, should investors buy or avoid Hangzhou Seck Intelligent Technology? Hangzhou Seck Intelligent Technology has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Hangzhou Seck Intelligent Technology's dividend merits.

With that being said, if dividends aren't your biggest concern with Hangzhou Seck Intelligent Technology, you should know about the other risks facing this business. For example, we've found 1 warning sign for Hangzhou Seck Intelligent Technology that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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

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.