CyberTech Systems and Software Limited (NSE:CYBERTECH) Passed Our Checks, And It's About To Pay A ₹4.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CyberTech Systems and Software Limited (NSE:CYBERTECH) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a 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. This means that investors who purchase CyberTech Systems and Software's shares on or after the 19th of September will not receive the dividend, which will be paid on the 24th of October.

The company's upcoming dividend is ₹4.00 a share, following on from the last 12 months, when the company distributed a total of ₹4.00 per share to shareholders. Looking at the last 12 months of distributions, CyberTech Systems and Software has a trailing yield of approximately 2.6% on its current stock price of ₹155.58. 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.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see CyberTech Systems and Software paying out a modest 36% of its earnings. A useful secondary check can be to evaluate whether CyberTech Systems and Software generated enough free cash flow to afford its dividend. It paid out 17% of its free cash flow as dividends last year, which is conservatively low.

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.

Check out our latest analysis for CyberTech Systems and Software

Click here to see how much of its profit CyberTech Systems and Software 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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, CyberTech Systems and Software's earnings per share have been growing at 19% a year for the past 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 10 years, CyberTech Systems and Software has increased its dividend at approximately 15% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is CyberTech Systems and Software an attractive dividend stock, or better left on the shelf? CyberTech Systems and Software 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. CyberTech Systems and Software looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while CyberTech Systems and Software looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for CyberTech Systems and Software that you should be aware of before investing in their shares.

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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.