Changzhou Zhongying Science & Technology (SZSE:300936) Could Be A Buy For Its Upcoming Dividend

Changzhou Zhongying Science & Technology Co., Ltd (SZSE:300936) is about to trade ex-dividend in the next three 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Changzhou Zhongying Science & Technology's shares before the 31st of May in order to receive the dividend, which the company will pay on the 31st of May.

The company's next dividend payment will be CN¥0.70 per share. Last year, in total, the company distributed CN¥0.70 to shareholders. Calculating the last year's worth of payments shows that Changzhou Zhongying Science & Technology has a trailing yield of 2.1% on the current share price of CN¥32.72. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Changzhou Zhongying Science & Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Changzhou Zhongying Science & Technology paid out a comfortable 36% of its profit last year.

Click here to see how much of its profit Changzhou Zhongying Science & Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Changzhou Zhongying Science & Technology's earnings per share have risen 16% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past three years, Changzhou Zhongying Science & Technology has increased its dividend at approximately 12% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

From a dividend perspective, should investors buy or avoid Changzhou Zhongying Science & Technology? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Changzhou Zhongying Science & Technology ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

On that note, you'll want to research what risks Changzhou Zhongying Science & Technology is facing. Every company has risks, and we've spotted 3 warning signs for Changzhou Zhongying Science & Technology (of which 1 is a bit concerning!) you should know about.

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.