Only Four Days Left To Cash In On Chung-Hsin Electric and Machinery Manufacturing's (TWSE:1513) Dividend

It looks like Chung-Hsin Electric and Machinery Manufacturing Corp. (TWSE:1513) is about to go ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a 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. Thus, you can purchase Chung-Hsin Electric and Machinery Manufacturing's shares before the 1st of July in order to receive the dividend, which the company will pay on the 24th of July.

The company's upcoming dividend is NT$3.60 a share, following on from the last 12 months, when the company distributed a total of NT$3.60 per share to shareholders. Calculating the last year's worth of payments shows that Chung-Hsin Electric and Machinery Manufacturing has a trailing yield of 1.9% on the current share price of NT$186.50. If you buy this business for its dividend, you should have an idea of whether Chung-Hsin Electric and Machinery Manufacturing's dividend is reliable and sustainable. So we need to investigate whether Chung-Hsin Electric and Machinery Manufacturing can afford its dividend, and if the dividend could grow.

View our latest analysis for Chung-Hsin Electric and Machinery Manufacturing

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. Chung-Hsin Electric and Machinery Manufacturing paid out 99% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. 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. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.

It's good to see that while Chung-Hsin Electric and Machinery Manufacturing's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

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 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 Chung-Hsin Electric and Machinery Manufacturing's earnings have been skyrocketing, up 22% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Chung-Hsin Electric and Machinery Manufacturing has lifted its dividend by approximately 15% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is Chung-Hsin Electric and Machinery Manufacturing an attractive dividend stock, or better left on the shelf? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Chung-Hsin Electric and Machinery Manufacturing's paying out such a high percentage of its profit. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you'll want to research what risks Chung-Hsin Electric and Machinery Manufacturing is facing. For example - Chung-Hsin Electric and Machinery Manufacturing has 4 warning signs we think 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.

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