There's A Lot To Like About TYC Brother Industrial's (TWSE:1522) Upcoming NT$2.00 Dividend

TYC Brother Industrial Co., Ltd. (TWSE:1522) is about to trade ex-dividend in the next three 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 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. Thus, you can purchase TYC Brother Industrial's shares before the 18th of July in order to receive the dividend, which the company will pay on the 16th of August.

The company's next dividend payment will be NT$2.00 per share, on the back of last year when the company paid a total of NT$2.00 to shareholders. Based on the last year's worth of payments, TYC Brother Industrial stock has a trailing yield of around 2.8% on the current share price of NT$70.50. If you buy this business for its dividend, you should have an idea of whether TYC Brother Industrial's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for TYC Brother Industrial

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately TYC Brother Industrial's payout ratio is modest, at just 43% of profit. A useful secondary check can be to evaluate whether TYC Brother Industrial generated enough free cash flow to afford its dividend. Luckily it paid out just 20% of its free cash flow last year.

It's positive to see that TYC Brother Industrial'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 TYC Brother Industrial 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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, TYC Brother Industrial's earnings per share have been growing at 19% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. TYC Brother Industrial has delivered 8.0% dividend growth per year on average over the past nine years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is TYC Brother Industrial an attractive dividend stock, or better left on the shelf? TYC Brother Industrial has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

In light of that, while TYC Brother Industrial has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with TYC Brother Industrial 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.

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