Just Three Days Till World Known MFG (Cayman) Limited (TWSE:4581) Will Be Trading Ex-Dividend

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 World Known MFG (Cayman) Limited (TWSE:4581) is about to go ex-dividend in just 3 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase World Known MFG (Cayman)'s shares before the 25th of July in order to be eligible for the dividend, which will be paid on the 28th of August.

The company's next dividend payment will be NT$3.60 per share, on the back of last year when the company paid a total of NT$3.60 to shareholders. Based on the last year's worth of payments, World Known MFG (Cayman) has a trailing yield of 5.7% on the current stock price of NT$62.90. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for World Known MFG (Cayman)

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. World Known MFG (Cayman) paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether World Known MFG (Cayman) generated enough free cash flow to afford its dividend. Fortunately, it paid out only 40% of its free cash flow in the past year.

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 how much of its profit World Known MFG (Cayman) 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at World Known MFG (Cayman), with earnings per share up 3.4% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past four years, World Known MFG (Cayman) has increased its dividend at approximately 4.7% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has World Known MFG (Cayman) got what it takes to maintain its dividend payments? Earnings per share growth has been modest and World Known MFG (Cayman) paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, it's hard to get excited about World Known MFG (Cayman) from a dividend perspective.

While it's tempting to invest in World Known MFG (Cayman) for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 2 warning signs with World Known MFG (Cayman) and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com