There's A Lot To Like About BYD Electronic (International)'s (HKG:285) Upcoming CN¥0.538 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see BYD Electronic (International) Company Limited (HKG:285) is about to trade ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase BYD Electronic (International)'s shares before the 11th of June to receive the dividend, which will be paid on the 6th of August.

The company's upcoming dividend is CN¥0.538 a share, following on from the last 12 months, when the company distributed a total of CN¥0.54 per share to shareholders. Calculating the last year's worth of payments shows that BYD Electronic (International) has a trailing yield of 1.6% on the current share price of HK$35.55. If you buy this business for its dividend, you should have an idea of whether BYD Electronic (International)'s dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for BYD Electronic (International)

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. BYD Electronic (International) paid out a comfortable 30% of its profit last year. A useful secondary check can be to evaluate whether BYD Electronic (International) generated enough free cash flow to afford its dividend. The good news is it paid out just 5.8% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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 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, BYD Electronic (International)'s earnings per share have been growing at 13% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, BYD Electronic (International) has lifted its dividend by approximately 34% 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

Should investors buy BYD Electronic (International) for the upcoming dividend? BYD Electronic (International) has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about BYD Electronic (International), and we would prioritise taking a closer look at it.

Wondering what the future holds for BYD Electronic (International)? See what the 19 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.