Four Days Left Until Taiwan Sanyo Electric Co.,Ltd. (TWSE:1614) Trades Ex-Dividend

Taiwan Sanyo Electric Co.,Ltd. (TWSE:1614) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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 Taiwan Sanyo ElectricLtd's shares before the 9th of July to receive the dividend, which will be paid on the 6th of August.

The company's next dividend payment will be NT$1.073005 per share. Last year, in total, the company distributed NT$1.07 to shareholders. Based on the last year's worth of payments, Taiwan Sanyo ElectricLtd has a trailing yield of 2.4% on the current stock price of NT$45.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Taiwan Sanyo ElectricLtd

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. Last year, Taiwan Sanyo ElectricLtd paid out 96% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.

It's good to see that while Taiwan Sanyo ElectricLtd's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

Click here to see how much of its profit Taiwan Sanyo ElectricLtd 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Taiwan Sanyo ElectricLtd earnings per share are up 7.5% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Taiwan Sanyo ElectricLtd has lifted its dividend by approximately 0.6% a year on average.

To Sum It Up

Is Taiwan Sanyo ElectricLtd an attractive dividend stock, or better left on the shelf? Earnings per share have grown modestly, and last year Taiwan Sanyo ElectricLtd paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

However if you're still interested in Taiwan Sanyo ElectricLtd as a potential investment, you should definitely consider some of the risks involved with Taiwan Sanyo ElectricLtd. Every company has risks, and we've spotted 1 warning sign for Taiwan Sanyo ElectricLtd you should know about.

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