Universal Cement Corporation (TWSE:1104) Stock Goes Ex-Dividend In Just Four Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Universal Cement Corporation (TWSE:1104) is about to go ex-dividend in just four 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. 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. Therefore, if you purchase Universal Cement's shares on or after the 16th of July, you won't be eligible to receive the dividend, when it is paid on the 21st of August.

The company's next dividend payment will be NT$1.80 per share. Last year, in total, the company distributed NT$1.80 to shareholders. Based on the last year's worth of payments, Universal Cement has a trailing yield of 5.0% on the current stock price of NT$36.25. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Universal Cement

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Universal Cement is paying out an acceptable 58% of its profit, a common payout level among most companies. 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. Dividends consumed 66% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Universal Cement 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Universal Cement's earnings per share have been growing at 15% a year for the past five years. Universal Cement has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Universal Cement has increased its dividend at approximately 8.3% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Universal Cement? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Universal Cement's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 58% and 66% respectively. Overall, it's hard to get excited about Universal Cement from a dividend perspective.

While it's tempting to invest in Universal Cement for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Universal Cement you should be aware of.

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