Do These 3 Checks Before Buying Apex Biotechnology Corp. (TWSE:1733) For Its Upcoming Dividend

Readers hoping to buy Apex Biotechnology Corp. (TWSE:1733) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Apex Biotechnology's shares on or after the 17th of May, you won't be eligible to receive the dividend, when it is paid on the 14th of June.

The company's next dividend payment will be NT$1.10 per share. Last year, in total, the company distributed NT$1.10 to shareholders. Looking at the last 12 months of distributions, Apex Biotechnology has a trailing yield of approximately 3.1% on its current stock price of NT$35.30. If you buy this business for its dividend, you should have an idea of whether Apex Biotechnology's dividend is reliable and sustainable. So we need to investigate whether Apex Biotechnology can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Apex Biotechnology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Apex Biotechnology paid out 95% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. 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 last year it paid out 68% of its free cash flow as dividends, within the usual range for most companies.

It's good to see that while Apex Biotechnology's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

Click here to see how much of its profit Apex Biotechnology 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Apex Biotechnology earnings per share are up 4.0% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Apex Biotechnology has seen its dividend decline 10% per annum on average over the past 10 years, which is not great to see. Apex Biotechnology is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is Apex Biotechnology an attractive dividend stock, or better left on the shelf? Earnings per share have not grown all that much, and the company is paying out an uncomfortably high percentage of its income. Fortunately it paid out a lower percentage of its cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that in mind though, if the poor dividend characteristics of Apex Biotechnology don't faze you, it's worth being mindful of the risks involved with this business. For example - Apex Biotechnology has 1 warning sign 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.