Hong Tai Electric Industrial Co., Ltd. (TWSE:1612) Is About To Go Ex-Dividend, And It Pays A 5.2% Yield

Readers hoping to buy Hong Tai Electric Industrial Co., Ltd. (TWSE:1612) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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 Hong Tai Electric Industrial's shares before the 2nd of July in order to receive the dividend, which the company will pay on the 26th of July.

The company's next dividend payment will be NT$2.00 per share. Last year, in total, the company distributed NT$2.00 to shareholders. Based on the last year's worth of payments, Hong Tai Electric Industrial has a trailing yield of 5.2% on the current stock price of NT$38.55. 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 investigate whether Hong Tai Electric Industrial can afford its dividend, and if the dividend could grow.

View our latest analysis for Hong Tai Electric Industrial

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. Last year Hong Tai Electric Industrial paid out 97% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 71% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's good to see that while Hong Tai Electric Industrial's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

Click here to see how much of its profit Hong Tai Electric 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Hong Tai Electric Industrial has grown its earnings rapidly, up 40% a year 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, Hong Tai Electric Industrial has lifted its dividend by approximately 25% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Should investors buy Hong Tai Electric Industrial for the upcoming dividend? Hong Tai Electric Industrial has been growing its earnings per share nicely, although judging by the difference between its profit and cashflow payout ratios, the company might have reported some write-offs over the last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Hong Tai Electric Industrial's dividend merits.

However if you're still interested in Hong Tai Electric Industrial as a potential investment, you should definitely consider some of the risks involved with Hong Tai Electric Industrial. To that end, you should learn about the 2 warning signs we've spotted with Hong Tai Electric Industrial (including 1 which doesn't sit too well with us).

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.

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