Fujian Boss Software Corp. (SZSE:300525) is about to trade ex-dividend in the next 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. 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. Meaning, you will need to purchase Fujian Boss Software's shares before the 2nd of September to receive the dividend, which will be paid on the 2nd of September.

The company's upcoming dividend is CN¥0.10 a share, following on from the last 12 months, when the company distributed a total of CN¥0.10 per share to shareholders. Looking at the last 12 months of distributions, Fujian Boss Software has a trailing yield of approximately 0.4% on its current stock price of CN¥23.87. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Fujian Boss Software can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Fujian Boss Software

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fujian Boss Software is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 6.6% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Fujian Boss Software'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 Fujian Boss Software 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. That's why it's comforting to see Fujian Boss Software's earnings have been skyrocketing, up 34% per annum for the past five years. Fujian Boss Software earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last six years, Fujian Boss Software has lifted its dividend by approximately 3.5% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Fujian Boss Software is keeping back more of its profits to grow the business.

The Bottom Line

Has Fujian Boss Software got what it takes to maintain its dividend payments? It's great that Fujian Boss Software is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Fujian Boss Software, and we would prioritise taking a closer look at it.

Keen to explore more data on Fujian Boss Software's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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.

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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.