Charoen Pokphand Enterprise (Taiwan) Co., Ltd. (TWSE:1215) Will Pay A NT$5.50 Dividend In Three Days

Charoen Pokphand Enterprise (Taiwan) Co., Ltd. (TWSE:1215) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, Charoen Pokphand Enterprise (Taiwan) investors that purchase the stock on or after the 26th of June will not receive the dividend, which will be paid on the 19th of July.

The company's next dividend payment will be NT$5.50 per share, and in the last 12 months, the company paid a total of NT$5.50 per share. Last year's total dividend payments show that Charoen Pokphand Enterprise (Taiwan) has a trailing yield of 4.9% on the current share price of NT$112.50. 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 Charoen Pokphand Enterprise (Taiwan)

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. Charoen Pokphand Enterprise (Taiwan) paid out more than half (73%) of its earnings last year, which is a regular payout ratio for most companies. 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. Over the past year it paid out 156% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While Charoen Pokphand Enterprise (Taiwan)'s dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Charoen Pokphand Enterprise (Taiwan) to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Charoen Pokphand Enterprise (Taiwan) 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Charoen Pokphand Enterprise (Taiwan)'s earnings per share have risen 19% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Charoen Pokphand Enterprise (Taiwan) has lifted its dividend by approximately 24% a year on average. 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

Is Charoen Pokphand Enterprise (Taiwan) worth buying for its dividend? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 156% of its cashflow, which is uncomfortably high. Overall, it's hard to get excited about Charoen Pokphand Enterprise (Taiwan) from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Charoen Pokphand Enterprise (Taiwan), you should know about the other risks facing this business. To help with this, we've discovered 2 warning signs for Charoen Pokphand Enterprise (Taiwan) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com