Hanpin Electron Co., Ltd. (TWSE:2488) Will Pay A NT$2.80 Dividend In Four Days

Hanpin Electron Co., Ltd. (TWSE:2488) 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. 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 Hanpin Electron's shares before the 24th of September in order to be eligible for the dividend, which will be paid on the 25th of October.

The company's upcoming dividend is NT$2.80 a share, following on from the last 12 months, when the company distributed a total of NT$2.80 per share to shareholders. Looking at the last 12 months of distributions, Hanpin Electron has a trailing yield of approximately 5.4% on its current stock price of NT$51.60. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Hanpin Electron can afford its dividend, and if the dividend could grow.

See our latest analysis for Hanpin Electron

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. Hanpin Electron paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies. 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 distributed 33% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Hanpin Electron'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 Hanpin Electron paid out over the last 12 months.

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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Hanpin Electron, with earnings per share up 6.2% on average over the last five years. Decent historical earnings per share growth suggests Hanpin Electron has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Hanpin Electron has lifted its dividend by approximately 3.4% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Should investors buy Hanpin Electron for the upcoming dividend? Earnings per share growth has been modest and Hanpin Electron paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

So while Hanpin Electron looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for Hanpin Electron that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.