Great Wall Enterprise Co., Ltd. (TWSE:1210) Looks Interesting, And It's About To Pay A Dividend

Great Wall Enterprise Co., Ltd. (TWSE:1210) stock is about to trade ex-dividend in 3 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Great Wall Enterprise investors that purchase the stock on or after the 1st of August will not receive the dividend, which will be paid on the 6th of September.

The company's upcoming dividend is NT$2.222353 a share, following on from the last 12 months, when the company distributed a total of NT$2.20 per share to shareholders. Based on the last year's worth of payments, Great Wall Enterprise stock has a trailing yield of around 3.8% on the current share price of NT$57.40. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Great Wall Enterprise can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Great Wall Enterprise

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Great Wall Enterprise paid out a comfortable 45% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 41% of its free cash flow in the past year.

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 Great Wall Enterprise paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Great Wall Enterprise's earnings per share have been growing at 15% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Great Wall Enterprise has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy Great Wall Enterprise for the upcoming dividend? It's great that Great Wall Enterprise 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. There's a lot to like about Great Wall Enterprise, and we would prioritise taking a closer look at it.

While it's tempting to invest in Great Wall Enterprise for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Great Wall 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