Sunday, May 19, 2024

Is It Smart To Buy Willfar Information Technology Co., Ltd. (SHSE:688100) Before It Goes Ex-Dividend?

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Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Willfar Information Technology Co., Ltd. (SHSE:688100) is about to go ex-dividend in just three 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. Thus, you can purchase Willfar Information Technology’s shares before the 9th of May in order to receive the dividend, which the company will pay on the 9th of May.

The company’s upcoming dividend is CN¥0.43 a share, following on from the last 12 months, when the company distributed a total of CN¥0.43 per share to shareholders. Based on the last year’s worth of payments, Willfar Information Technology has a trailing yield of 1.2% on the current stock price of CN¥34.79. 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.

See our latest analysis for Willfar Information 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. Willfar Information Technology paid out a comfortable 39% of its profit last year. 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. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.

It’s positive to see that Willfar Information 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.

SHSE:688100 Historic Dividend May 5th 2024

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. 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 Willfar Information Technology’s earnings have been skyrocketing, up 23% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, four years ago, Willfar Information Technology has lifted its dividend by approximately 25% a year on average. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Willfar Information Technology an attractive dividend stock, or better left on the shelf? We love that Willfar Information Technology is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There’s a lot to like about Willfar Information Technology, and we would prioritise taking a closer look at it.

On that note, you’ll want to research what risks Willfar Information Technology is facing. For example, we’ve found 1 warning sign for Willfar Information Technology that we recommend you consider before investing in the business.

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.

Valuation is complex, but we’re helping make it simple.

Find out whether Willfar Information Technology is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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.

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