Lumax International Corp., Ltd. (TWSE:6192) Will Pay A NT$5.00 Dividend In Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Lumax International Corp., Ltd. (TWSE:6192) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Lumax International investors that purchase the stock on or after the 25th of April will not receive the dividend, which will be paid on the 23rd of May.

The company's next dividend payment will be NT$5.00 per share, on the back of last year when the company paid a total of NT$5.00 to shareholders. Looking at the last 12 months of distributions, Lumax International has a trailing yield of approximately 4.5% on its current stock price of NT$110.50. If you buy this business for its dividend, you should have an idea of whether Lumax International's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Lumax International

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. Lumax International paid out 61% of its earnings to investors last year, a normal payout level for most businesses. 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 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Lumax International paid out over the last 12 months.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Lumax International's flat earnings 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. 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Lumax International has lifted its dividend by approximately 1.5% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Lumax International? Earnings per share have barely grown, and although Lumax International paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. In summary, it's hard to get excited about Lumax International from a dividend perspective.

If you're not too concerned about Lumax International's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Lumax International has 1 warning sign we think 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.