Four Days Left Until Hong Yi Fiber Ind. Co., Ltd. (TWSE:1452) Trades Ex-Dividend

Hong Yi Fiber Ind. Co., Ltd. (TWSE:1452) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. In other words, investors can purchase Hong Yi Fiber Ind's shares before the 3rd of July in order to be eligible for the dividend, which will be paid on the 5th of August.

The company's upcoming dividend is NT$0.30 a share, following on from the last 12 months, when the company distributed a total of NT$0.30 per share to shareholders. Looking at the last 12 months of distributions, Hong Yi Fiber Ind has a trailing yield of approximately 1.8% on its current stock price of NT$16.85. 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 Hong Yi Fiber Ind has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Hong Yi Fiber Ind

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hong Yi Fiber Ind is paying out an acceptable 65% of its profit, a common payout level among most companies. 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 25% of its cash flow last year.

It's positive to see that Hong Yi Fiber Ind'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 Hong Yi Fiber Ind paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Hong Yi Fiber Ind's earnings per share have fallen at approximately 21% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hong Yi Fiber Ind's dividend payments per share have declined at 5.0% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Has Hong Yi Fiber Ind got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. In summary, it's hard to get excited about Hong Yi Fiber Ind from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Hong Yi Fiber Ind, you should know about the other risks facing this business. Be aware that Hong Yi Fiber Ind is showing 4 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

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.

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