Why You Might Be Interested In Weaver Network Technology Co., Ltd. (SHSE:603039) For Its Upcoming Dividend

Simply Wall St · 10/21 22:31

It looks like Weaver Network Technology Co., Ltd. (SHSE:603039) is about to go ex-dividend in the next two 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. 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 Weaver Network Technology's shares on or after the 24th of October will not receive the dividend, which will be paid on the 24th of October.

The company's next dividend payment will be CN¥0.075 per share. Last year, in total, the company distributed CN¥0.15 to shareholders. Last year's total dividend payments show that Weaver Network Technology has a trailing yield of 0.4% on the current share price of CN¥37.59. If you buy this business for its dividend, you should have an idea of whether Weaver Network Technology's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Weaver Network Technology

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Weaver Network Technology paying out a modest 31% of its earnings. A useful secondary check can be to evaluate whether Weaver Network Technology generated enough free cash flow to afford its dividend. Luckily it paid out just 24% of its free cash flow last year.

It's positive to see that Weaver Network 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.

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SHSE:603039 Historic Dividend October 21st 2024

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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Weaver Network Technology, with earnings per share up 9.5% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last seven years, Weaver Network Technology has lifted its dividend by approximately 20% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Weaver Network Technology for the upcoming dividend? Earnings per share growth has been growing somewhat, and Weaver Network Technology is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Weaver Network Technology is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Weaver Network Technology is facing. In terms of investment risks, we've identified 1 warning sign with Weaver Network Technology and understanding them should be part of your investment process.

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