Should Income Investors Look At Ocean Plastics Co., Ltd. (TWSE:1321) Before Its Ex-Dividend?

It looks like Ocean Plastics Co., Ltd. (TWSE:1321) is about to go 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Ocean Plastics' shares before the 23rd of August in order to be eligible for the dividend, which will be paid on the 16th of September.

The company's next dividend payment will be NT$0.40 per share. Last year, in total, the company distributed NT$0.40 to shareholders. Looking at the last 12 months of distributions, Ocean Plastics has a trailing yield of approximately 1.0% on its current stock price of NT$41.65. 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.

View our latest analysis for Ocean Plastics

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. That's why it's good to see Ocean Plastics paying out a modest 38% of its earnings.

Click here to see how much of its profit Ocean Plastics paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Ocean Plastics's earnings are down 4.8% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ocean Plastics has seen its dividend decline 26% per annum on average over the past three years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Is Ocean Plastics worth buying for its dividend? Ocean Plastics's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. Ocean Plastics ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Ocean Plastics for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Ocean Plastics 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.

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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.