Only Three Days Left To Cash In On Uni-President Enterprises' (TWSE:1216) Dividend

It looks like Uni-President Enterprises Corp. (TWSE:1216) is about to go ex-dividend in the next 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. 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. This means that investors who purchase Uni-President Enterprises' shares 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$3.00 a share, following on from the last 12 months, when the company distributed a total of NT$3.00 per share to shareholders. Based on the last year's worth of payments, Uni-President Enterprises stock has a trailing yield of around 3.4% on the current share price of NT$87.20. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Uni-President Enterprises

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. Last year, Uni-President Enterprises paid out 90% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.

It's good to see that while Uni-President Enterprises's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Uni-President Enterprises's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Uni-President Enterprises has delivered 8.2% dividend growth per year on average over the past 10 years.

Final Takeaway

Is Uni-President Enterprises worth buying for its dividend? Earnings per share have been flat and, while Uni-President Enterprises paid out just 35% of its cashflow, it paid out an uncomfortably high percentage of its profit. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Uni-President Enterprises's dividend merits.

With that being said, if dividends aren't your biggest concern with Uni-President Enterprises, you should know about the other risks facing this business. Every company has risks, and we've spotted 2 warning signs for Uni-President Enterprises you should know about.

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