Four Days Left To Buy Zippy Technology Corp. (TWSE:2420) Before The Ex-Dividend Date

Zippy Technology Corp. (TWSE:2420) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. In other words, investors can purchase Zippy Technology's shares before the 28th of August in order to be eligible for the dividend, which will be paid on the 26th of September.

The company's next dividend payment will be NT$3.00 per share. Last year, in total, the company distributed NT$3.00 to shareholders. Based on the last year's worth of payments, Zippy Technology stock has a trailing yield of around 4.4% on the current share price of NT$68.00. If you buy this business for its dividend, you should have an idea of whether Zippy Technology's dividend is reliable and sustainable. 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 Zippy Technology

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Zippy Technology paid out more than half (74%) of its earnings last year, which is a regular payout ratio for 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. 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 positive to see that Zippy Technology'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 Zippy Technology 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. This is why it's a relief to see Zippy Technology earnings per share are up 4.4% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half 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 last 10 years, Zippy Technology has lifted its dividend by approximately 4.1% 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 Zippy Technology got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and Zippy Technology paid out a bit over half of its earnings and free cash flow last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

With that being said, if dividends aren't your biggest concern with Zippy Technology, you should know about the other risks facing this business. For example, we've found 1 warning sign for Zippy Technology that we recommend you consider before investing in the business.

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.