There's A Lot To Like About LongDa Construction & Development's (TWSE:5519) Upcoming NT$2.20 Dividend

Readers hoping to buy LongDa Construction & Development Corporation (TWSE:5519) 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase LongDa Construction & Development's shares before the 18th of June to receive the dividend, which will be paid on the 18th of July.

The company's next dividend payment will be NT$2.20 per share, and in the last 12 months, the company paid a total of NT$2.20 per share. Based on the last year's worth of payments, LongDa Construction & Development stock has a trailing yield of around 4.4% on the current share price of NT$50.10. 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 LongDa Construction & Development has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for LongDa Construction & Development

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 LongDa Construction & Development paying out a modest 47% of its earnings. A useful secondary check can be to evaluate whether LongDa Construction & Development generated enough free cash flow to afford its dividend. Fortunately, it paid out only 34% of its free cash flow in the past year.

It's positive to see that LongDa Construction & Development'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 LongDa Construction & Development 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 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, LongDa Construction & Development's earnings per share have been growing at 14% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. LongDa Construction & Development has delivered an average of 12% 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.

Final Takeaway

Is LongDa Construction & Development worth buying for its dividend? It's great that LongDa Construction & Development is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. LongDa Construction & Development looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks LongDa Construction & Development is facing. To help with this, we've discovered 3 warning signs for LongDa Construction & Development that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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

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.