There's A Lot To Like About Bytes Technology Group's (LON:BYIT) Upcoming UK£0.027 Dividend

Bytes Technology Group plc (LON:BYIT) is about to trade ex-dividend in the next 3 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. In other words, investors can purchase Bytes Technology Group's shares before the 16th of November in order to be eligible for the dividend, which will be paid on the 1st of December.

The company's next dividend payment will be UK£0.027 per share, on the back of last year when the company paid a total of UK£0.15 to shareholders. Looking at the last 12 months of distributions, Bytes Technology Group has a trailing yield of approximately 3.0% on its current stock price of £5.12. 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.

Check out our latest analysis for Bytes Technology Group

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 Bytes Technology Group paying out a modest 42% of its earnings. A useful secondary check can be to evaluate whether Bytes Technology Group generated enough free cash flow to afford its dividend. It paid out more than half (65%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Bytes Technology Group'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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Bytes Technology Group's earnings have been skyrocketing, up 21% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bytes Technology Group has delivered an average of 96% per year annual increase in its dividend, based on the past two years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy Bytes Technology Group for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Bytes Technology Group paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Bytes Technology Group, and we would prioritise taking a closer look at it.

So while Bytes Technology Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Bytes Technology Group 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.