Formosa Prosonic Industries Berhad (KLSE:FPI) Stock Goes Ex-Dividend In Just Four Days

It looks like Formosa Prosonic Industries Berhad (KLSE:FPI) is about to go ex-dividend in the next 4 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. Accordingly, Formosa Prosonic Industries Berhad investors that purchase the stock on or after the 8th of April will not receive the dividend, which will be paid on the 30th of April.

The company's next dividend payment will be RM00.23 per share. Last year, in total, the company distributed RM0.23 to shareholders. Calculating the last year's worth of payments shows that Formosa Prosonic Industries Berhad has a trailing yield of 7.3% on the current share price of RM03.13. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Formosa Prosonic Industries Berhad

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. Formosa Prosonic Industries Berhad is paying out an acceptable 50% of its profit, a common payout level among most companies. 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 last year it paid out 61% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Formosa Prosonic Industries Berhad'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 Formosa Prosonic Industries Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 Formosa Prosonic Industries Berhad's earnings have been skyrocketing, up 25% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Formosa Prosonic Industries Berhad could have strong prospects for future increases to the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Formosa Prosonic Industries Berhad has increased its dividend at approximately 14% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Has Formosa Prosonic Industries Berhad got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Formosa Prosonic Industries Berhad's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 50% and 61% respectively. All things considered, we are not particularly enthused about Formosa Prosonic Industries Berhad from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for Formosa Prosonic Industries Berhad and you should be aware of this before buying any shares.

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.