Lontium Semiconductor Corporation (SHSE:688486) Pays A CN¥1.40255 Dividend In Just Four Days

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 Lontium Semiconductor Corporation (SHSE:688486) is about to go ex-dividend in just four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Lontium Semiconductor's shares on or after the 3rd of June will not receive the dividend, which will be paid on the 3rd of June.

The company's upcoming dividend is CN¥1.40255 a share, following on from the last 12 months, when the company distributed a total of CN¥1.40 per share to shareholders. Last year's total dividend payments show that Lontium Semiconductor has a trailing yield of 1.7% on the current share price of CN¥83.09. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Lontium Semiconductor has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Lontium Semiconductor

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 77% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. 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. Dividends consumed 58% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Lontium Semiconductor's earnings per share have risen 18% per annum over the last five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

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

Final Takeaway

Is Lontium Semiconductor worth buying for its dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Lontium Semiconductor is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. To summarise, Lontium Semiconductor looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Lontium Semiconductor for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 3 warning signs for Lontium Semiconductor (1 doesn't sit too well with us) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.