Nien Made Enterprise Co., LTD. (TWSE:8464) Passed Our Checks, And It's About To Pay A NT$12.00 Dividend

Readers hoping to buy Nien Made Enterprise Co., LTD. (TWSE:8464) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Nien Made Enterprise investors that purchase the stock on or after the 9th of July will not receive the dividend, which will be paid on the 2nd of August.

The company's next dividend payment will be NT$12.00 per share, and in the last 12 months, the company paid a total of NT$12.00 per share. Looking at the last 12 months of distributions, Nien Made Enterprise has a trailing yield of approximately 2.9% on its current stock price of NT$415.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Nien Made Enterprise

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Nien Made Enterprise paid out 61% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Nien Made Enterprise generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 48% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Nien Made Enterprise'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 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Nien Made Enterprise, with earnings per share up 9.8% on average over the last five years. Decent historical earnings per share growth suggests Nien Made Enterprise has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nien Made Enterprise has delivered an average of 5.1% per year annual increase in its dividend, based on the past eight years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Nien Made Enterprise worth buying for its dividend? Earnings per share growth has been modest and Nien Made Enterprise paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Nien Made Enterprise's dividend merits.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for Nien Made Enterprise that you should be aware of before investing in their shares.

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