There's A Lot To Like About Sunonwealth Electric Machine Industry's (TWSE:2421) Upcoming NT$3.50 Dividend

It looks like Sunonwealth Electric Machine Industry Co., Ltd. (TWSE:2421) 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 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. Meaning, you will need to purchase Sunonwealth Electric Machine Industry's shares before the 3rd of July to receive the dividend, which will be paid on the 26th of July.

The company's next dividend payment will be NT$3.50 per share, and in the last 12 months, the company paid a total of NT$3.50 per share. Last year's total dividend payments show that Sunonwealth Electric Machine Industry has a trailing yield of 3.1% on the current share price of NT$114.50. 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! As a result, readers should always check whether Sunonwealth Electric Machine Industry has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Sunonwealth Electric Machine Industry

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sunonwealth Electric Machine Industry paid out 67% of its earnings to investors last year, a normal payout level for most businesses. 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. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Sunonwealth Electric Machine Industry'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 the company's payout ratio, plus analyst estimates of its future dividends.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Sunonwealth Electric Machine Industry's earnings per share have been growing at 16% a year for the past five years. Sunonwealth Electric Machine Industry has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sunonwealth Electric Machine Industry has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Sunonwealth Electric Machine Industry an attractive dividend stock, or better left on the shelf? Sunonwealth Electric Machine Industry's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 2 warning signs for Sunonwealth Electric Machine Industry 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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