Should You Buy SciVision Biotech Inc. (TWSE:1786) For Its Upcoming Dividend?

SciVision Biotech Inc. (TWSE:1786) is about to trade ex-dividend in the next four 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase SciVision Biotech's shares before the 24th of July to receive the dividend, which will be paid on the 16th of August.

The company's next dividend payment will be NT$2.40756235 per share, and in the last 12 months, the company paid a total of NT$2.50 per share. Calculating the last year's worth of payments shows that SciVision Biotech has a trailing yield of 2.1% on the current share price of NT$119.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether SciVision Biotech has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for SciVision Biotech

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. It paid out 85% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. A useful secondary check can be to evaluate whether SciVision Biotech generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 46% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that SciVision Biotech's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit SciVision Biotech 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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see SciVision Biotech's earnings per share have risen 15% per annum over the last five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. SciVision Biotech has delivered 24% dividend growth per year on average over the past eight years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is SciVision Biotech an attractive dividend stock, or better left on the shelf? We like SciVision Biotech's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. SciVision Biotech looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks SciVision Biotech is facing. Our analysis shows 2 warning signs for SciVision Biotech and you should be aware of these before buying any shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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

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