Is It Smart To Buy Nanjing Bestway Intelligent Control Technology Co., Ltd. (SZSE:301195) Before It Goes Ex-Dividend?

Nanjing Bestway Intelligent Control Technology Co., Ltd. (SZSE:301195) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Nanjing Bestway Intelligent Control Technology's shares before the 29th of May in order to receive the dividend, which the company will pay on the 29th of May.

The company's next dividend payment will be CN¥0.6802 per share. Last year, in total, the company distributed CN¥0.68 to shareholders. Calculating the last year's worth of payments shows that Nanjing Bestway Intelligent Control Technology has a trailing yield of 2.1% on the current share price of CN¥32.71. 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.

View our latest analysis for Nanjing Bestway Intelligent Control Technology

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Nanjing Bestway Intelligent Control Technology's payout ratio is modest, at just 41% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Nanjing Bestway Intelligent Control 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?

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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Nanjing Bestway Intelligent Control Technology's earnings per share have risen 13% 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.

Unfortunately Nanjing Bestway Intelligent Control Technology has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Is Nanjing Bestway Intelligent Control Technology worth buying for its dividend? Nanjing Bestway Intelligent Control Technology has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Nanjing Bestway Intelligent Control Technology looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Nanjing Bestway Intelligent Control Technology is facing. Every company has risks, and we've spotted 1 warning sign for Nanjing Bestway Intelligent Control Technology you should know about.

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.