Income Investors Should Know That Chanjet Information Technology Company Limited (HKG:1588) Goes Ex-Dividend Soon

Readers hoping to buy Chanjet Information Technology Company Limited (HKG:1588) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Chanjet Information Technology's shares on or after the 10th of September will not receive the dividend, which will be paid on the 29th of October.

The company's upcoming dividend is CN¥0.14 a share, following on from the last 12 months, when the company distributed a total of CN¥0.25 per share to shareholders. Based on the last year's worth of payments, Chanjet Information Technology stock has a trailing yield of around 6.6% on the current share price of HK$4.44. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Last year Chanjet Information Technology paid out 93% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.

See our latest analysis for Chanjet Information Technology

Click here to see how much of its profit Chanjet Information Technology paid out over the last 12 months.

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. It's encouraging to see Chanjet Information Technology has grown its earnings rapidly, up 22% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Chanjet Information Technology's dividend payments per share have declined at 2.9% per year on average over the past seven years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

To Sum It Up

Is Chanjet Information Technology an attractive dividend stock, or better left on the shelf? We're not enthused to see Chanjet Information Technology's dividend was not well covered by earnings over the last year, although it is great to see earnings growing. Chanjet Information Technology ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Chanjet Information Technology for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Chanjet Information Technology that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.