Income Investors Should Know That Luo Lih-Fen Holding Co., Ltd. (TWSE:6666) Goes Ex-Dividend Soon

Luo Lih-Fen Holding Co., Ltd. (TWSE:6666) is about to trade ex-dividend in the next three 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. Thus, you can purchase Luo Lih-Fen Holding's shares before the 25th of July in order to receive the dividend, which the company will pay on the 28th of August.

The company's next dividend payment will be NT$1.30 per share, and in the last 12 months, the company paid a total of NT$1.30 per share. Based on the last year's worth of payments, Luo Lih-Fen Holding stock has a trailing yield of around 2.1% on the current share price of NT$62.50. 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 Luo Lih-Fen Holding can afford its dividend, and if the dividend could grow.

See our latest analysis for Luo Lih-Fen Holding

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Luo Lih-Fen Holding is paying out an acceptable 70% of its profit, a common payout level among 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. Luckily it paid out just 23% of its free cash flow last year.

It's positive to see that Luo Lih-Fen Holding'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 Luo Lih-Fen Holding paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Luo Lih-Fen Holding's earnings per share have dropped 29% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Luo Lih-Fen Holding has seen its dividend decline 27% per annum on average over the past five years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

Is Luo Lih-Fen Holding worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, it's hard to get excited about Luo Lih-Fen Holding from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Luo Lih-Fen Holding, you should know about the other risks facing this business. Every company has risks, and we've spotted 3 warning signs for Luo Lih-Fen Holding (of which 1 is a bit unpleasant!) you should know about.

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