Is It Worth Considering Cyberlinks Co., Ltd. (TSE:3683) For Its Upcoming Dividend?

Readers hoping to buy Cyberlinks Co., Ltd. (TSE:3683) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Thus, you can purchase Cyberlinks' shares before the 27th of December in order to receive the dividend, which the company will pay on the 28th of March.

The company's upcoming dividend is JP¥16.00 a share, following on from the last 12 months, when the company distributed a total of JP¥16.00 per share to shareholders. Last year's total dividend payments show that Cyberlinks has a trailing yield of 2.0% on the current share price of JP¥781.00. If you buy this business for its dividend, you should have an idea of whether Cyberlinks's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Cyberlinks

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Cyberlinks has a low and conservative payout ratio of just 22% of its income after tax. 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. Over the past year it paid out 119% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

While Cyberlinks's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Cyberlinks to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Cyberlinks 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Cyberlinks's earnings per share have been growing at 16% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last five years, Cyberlinks has lifted its dividend by approximately 15% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Cyberlinks an attractive dividend stock, or better left on the shelf? We like that Cyberlinks has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. In summary, while it has some positive characteristics, we're not inclined to race out and buy Cyberlinks today.

In light of that, while Cyberlinks has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Cyberlinks that you should be aware of before investing in their shares.

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.