Should Income Investors Look At Drewloong Precision, Inc. (TWSE:4572) Before Its Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Drewloong Precision, Inc. (TWSE:4572) is about to trade ex-dividend in the next three days. 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. Accordingly, Drewloong Precision investors that purchase the stock on or after the 25th of July will not receive the dividend, which will be paid on the 21st of August.

The company's next dividend payment will be NT$5.00 per share, and in the last 12 months, the company paid a total of NT$5.00 per share. Calculating the last year's worth of payments shows that Drewloong Precision has a trailing yield of 3.2% on the current share price of NT$157.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Drewloong Precision has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Drewloong Precision

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. Drewloong Precision is paying out an acceptable 73% of its profit, a common payout level among 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. Fortunately, it paid out only 46% of its free cash flow in the past year.

It's positive to see that Drewloong Precision'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?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Drewloong Precision's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last five years, Drewloong Precision has lifted its dividend by approximately 10% a year on average.

Final Takeaway

Should investors buy Drewloong Precision for the upcoming dividend? The payout ratios appear reasonably conservative, which implies the dividend may be somewhat sustainable. Still, with earnings basically flat, Drewloong Precision doesn't stand out from a dividend perspective. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Drewloong Precision's dividend merits.

With that being said, if dividends aren't your biggest concern with Drewloong Precision, you should know about the other risks facing this business. To help with this, we've discovered 1 warning sign for Drewloong Precision that you should be aware of before investing in their shares.

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