There's A Lot To Like About Apex Science & Engineering's (TWSE:3052) Upcoming NT$0.40 Dividend

Readers hoping to buy Apex Science & Engineering Corp. (TWSE:3052) 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Apex Science & Engineering's shares before the 23rd of August to receive the dividend, which will be paid on the 19th of September.

The company's next dividend payment will be NT$0.40 per share, and in the last 12 months, the company paid a total of NT$0.40 per share. Based on the last year's worth of payments, Apex Science & Engineering stock has a trailing yield of around 3.0% on the current share price of NT$13.55. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Apex Science & Engineering has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Apex Science & Engineering

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Apex Science & Engineering paying out a modest 40% of its 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. What's good is that dividends were well covered by free cash flow, with the company paying out 3.8% of its cash flow last year.

It's positive to see that Apex Science & Engineering'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 Apex Science & Engineering paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Apex Science & Engineering earnings per share are up 7.0% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Apex Science & Engineering's dividend payments per share have declined at 7.3% per year on average over the past 10 years, which is uninspiring. Apex Science & Engineering is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Is Apex Science & Engineering an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Apex Science & Engineering is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Apex Science & Engineering is halfway there. 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. For example, we've found 3 warning signs for Apex Science & Engineering that we recommend you consider before investing in the business.

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.