Johnson Health Tech .Co (TWSE:1736) Could Be A Buy For Its Upcoming Dividend

Johnson Health Tech .Co., Ltd. (TWSE:1736) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Johnson Health Tech .Co's shares before the 30th of July in order to be eligible for the dividend, which will be paid on the 26th of August.

The company's next dividend payment will be NT$0.9987537 per share, on the back of last year when the company paid a total of NT$1.00 to shareholders. Based on the last year's worth of payments, Johnson Health Tech .Co has a trailing yield of 0.9% on the current stock price of NT$114.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Johnson Health Tech .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. Johnson Health Tech .Co is paying out just 25% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It paid out 4.4% of its free cash flow as dividends last year, which is conservatively low.

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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Johnson Health Tech .Co has grown its earnings rapidly, up 26% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Johnson Health Tech .Co looks like a promising growth company.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Johnson Health Tech .Co's dividend payments are broadly unchanged compared to where they were 10 years ago.

Final Takeaway

Should investors buy Johnson Health Tech .Co for the upcoming dividend? It's great that Johnson Health Tech .Co 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. Johnson Health Tech .Co 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 Johnson Health Tech .Co is facing. For example - Johnson Health Tech .Co has 1 warning sign we think you should be aware of.

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