Norsyn Crop Technology Co., Ltd. (SZSE:001231) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. In other words, investors can purchase Norsyn Crop Technology's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 27th of September.

The company's next dividend payment will be CN¥0.05 per share, and in the last 12 months, the company paid a total of CN¥0.10 per share. Based on the last year's worth of payments, Norsyn Crop Technology has a trailing yield of 0.7% on the current stock price of CN¥13.48. If you buy this business for its dividend, you should have an idea of whether Norsyn Crop 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. Norsyn Crop Technology paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 24% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Norsyn Crop 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 how much of its profit Norsyn Crop 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Norsyn Crop Technology, with earnings per share up 3.9% on average over the last five years. Norsyn Crop Technology is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

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

Final Takeaway

Is Norsyn Crop Technology worth buying for its dividend? Earnings per share growth has been growing somewhat, and Norsyn Crop 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 Norsyn Crop Technology is being conservative with its dividend payouts and could still perform reasonably over the long run. Norsyn Crop Technology looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 1 warning sign with Norsyn Crop 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.

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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.