Income Investors Should Know That Zhen Ding Technology Holding Limited (TWSE:4958) Goes Ex-Dividend Soon

Zhen Ding Technology Holding Limited (TWSE:4958) stock is about to trade ex-dividend in two 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Zhen Ding Technology Holding's shares before the 6th of June in order to receive the dividend, which the company will pay on the 12th of July.

The company's upcoming dividend is NT$3.275 a share, following on from the last 12 months, when the company distributed a total of NT$3.27 per share to shareholders. Based on the last year's worth of payments, Zhen Ding Technology Holding stock has a trailing yield of around 2.7% on the current share price of NT$122.00. If you buy this business for its dividend, you should have an idea of whether Zhen Ding Technology Holding'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.

Check out our latest analysis for Zhen Ding Technology Holding

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. Zhen Ding Technology Holding paid out a comfortable 46% of its profit last year. A useful secondary check can be to evaluate whether Zhen Ding Technology Holding generated enough free cash flow to afford its dividend. Dividends consumed 66% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Zhen Ding Technology Holding'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?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Zhen Ding Technology Holding's earnings per share have fallen at approximately 7.7% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Zhen Ding Technology Holding has lifted its dividend by approximately 0.9% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid Zhen Ding Technology Holding? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you're not too concerned about Zhen Ding Technology Holding's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Every company has risks, and we've spotted 2 warning signs for Zhen Ding Technology Holding 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.