Eternal Materials Co., Ltd. (TWSE:1717) Is About To Go Ex-Dividend, And It Pays A 2.6% Yield

It looks like Eternal Materials Co., Ltd. (TWSE:1717) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. In other words, investors can purchase Eternal Materials' shares before the 25th of April in order to be eligible for the dividend, which will be paid on the 24th of May.

The company's next dividend payment will be NT$0.80 per share, on the back of last year when the company paid a total of NT$0.80 to shareholders. Last year's total dividend payments show that Eternal Materials has a trailing yield of 2.6% on the current share price of NT$30.50. If you buy this business for its dividend, you should have an idea of whether Eternal Materials's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Eternal Materials

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Eternal Materials paid out more than half (63%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Eternal Materials'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 Eternal Materials paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Eternal Materials's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Eternal Materials's dividend payments per share have declined at 3.8% per year on average over the past 10 years, which is uninspiring.

To Sum It Up

From a dividend perspective, should investors buy or avoid Eternal Materials? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. In summary, it's hard to get excited about Eternal Materials from a dividend perspective.

However if you're still interested in Eternal Materials as a potential investment, you should definitely consider some of the risks involved with Eternal Materials. For example, we've found 3 warning signs for Eternal Materials that we recommend you consider before investing in the business.

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.