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 Easy Click Worldwide Network Technology Co., Ltd. (SZSE:301171) is about to go ex-dividend in just four 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Easy Click Worldwide Network Technology's shares on or after the 29th of May will not receive the dividend, which will be paid on the 29th of May.

The company's upcoming dividend is CN¥0.11 a share, following on from the last 12 months, when the company distributed a total of CN¥0.11 per share to shareholders. Based on the last year's worth of payments, Easy Click Worldwide Network Technology has a trailing yield of 0.7% on the current stock price of CN¥15.71. If you buy this business for its dividend, you should have an idea of whether Easy Click Worldwide Network Technology's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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. Easy Click Worldwide Network Technology is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. The good news is it paid out just 12% of its free cash flow in the last year.

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.

Click here to see how much of its profit Easy Click Worldwide Network Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 not encouraging to see that Easy Click Worldwide Network Technology's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Given that Easy Click Worldwide Network Technology has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Has Easy Click Worldwide Network Technology got what it takes to maintain its dividend payments? While it's not great to see that earnings per share are effectively flat over the one-year period we checked, at least the payout ratios are low and conservative. To summarise, Easy Click Worldwide Network Technology looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Easy Click Worldwide Network Technology is facing. For example - Easy Click Worldwide Network Technology has 2 warning signs we think you should be aware of.

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.