There's A Lot To Like About Fulgent Sun International (Holding)'s (TWSE:9802) Upcoming NT$2.00 Dividend

Fulgent Sun International (Holding) Co., Ltd. (TWSE:9802) is about to trade ex-dividend in the next 4 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. Accordingly, Fulgent Sun International (Holding) investors that purchase the stock on or after the 18th of March will not receive the dividend, which will be paid on the 18th of April.

The company's next dividend payment will be NT$2.00 per share, on the back of last year when the company paid a total of NT$5.00 to shareholders. Calculating the last year's worth of payments shows that Fulgent Sun International (Holding) has a trailing yield of 3.9% on the current share price of NT$128.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Fulgent Sun International (Holding)

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. Fulgent Sun International (Holding) is paying out an acceptable 64% of its profit, a common payout level among 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 34% of its free cash flow as dividends, a comfortable payout level for most companies.

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 how much of its profit Fulgent Sun International (Holding) 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. 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 Fulgent Sun International (Holding), with earnings per share up 9.1% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Fulgent Sun International (Holding) has delivered 9.6% dividend growth per year on average over the past 10 years. 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.

Final Takeaway

Should investors buy Fulgent Sun International (Holding) for the upcoming dividend? Earnings per share growth has been modest and Fulgent Sun International (Holding) paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. All things considered, we are not particularly enthused about Fulgent Sun International (Holding) from a dividend perspective.

So while Fulgent Sun International (Holding) looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Fulgent Sun International (Holding) has 2 warning signs we think you should be aware of.

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.