Dividend Investors: Don't Be Too Quick To Buy Airmate (Cayman) International Co Limited (TWSE:1626) For Its Upcoming Dividend

Airmate (Cayman) International Co Limited (TWSE:1626) stock is about to trade ex-dividend in 3 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. 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 Airmate (Cayman) International Co's shares before the 20th of June in order to be eligible for the dividend, which will be paid on the 17th of July.

The company's next dividend payment will be NT$0.30 per share, on the back of last year when the company paid a total of NT$0.30 to shareholders. Based on the last year's worth of payments, Airmate (Cayman) International Co has a trailing yield of 1.9% on the current stock price of NT$15.95. 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 Airmate (Cayman) International Co has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Airmate (Cayman) International Co

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Airmate (Cayman) International Co reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Airmate (Cayman) International Co didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 39% of its free cash flow in the past year.

Click here to see how much of its profit Airmate (Cayman) International Co paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Airmate (Cayman) International Co was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Airmate (Cayman) International Co's dividend payments per share have declined at 18% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Remember, you can always get a snapshot of Airmate (Cayman) International Co's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Airmate (Cayman) International Co? It's hard to get used to Airmate (Cayman) International Co paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Airmate (Cayman) International Co has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Although, if you're still interested in Airmate (Cayman) International Co and want to know more, you'll find it very useful to know what risks this stock faces. For example, Airmate (Cayman) International Co has 3 warning signs (and 1 which can't be ignored) we think 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