There's A Lot To Like About Evermore Chemical Industry's (TWSE:1735) Upcoming NT$0.50 Dividend

It looks like Evermore Chemical Industry Co., Ltd. (TWSE:1735) is about to go ex-dividend in the next four 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Evermore Chemical Industry's shares before the 28th of August to receive the dividend, which will be paid on the 16th of September.

The company's next dividend payment will be NT$0.50 per share, and in the last 12 months, the company paid a total of NT$0.50 per share. Based on the last year's worth of payments, Evermore Chemical Industry has a trailing yield of 2.7% on the current stock price of NT$18.60. If you buy this business for its dividend, you should have an idea of whether Evermore Chemical Industry's dividend is reliable and sustainable. So we need to investigate whether Evermore Chemical Industry can afford its dividend, and if the dividend could grow.

View our latest analysis for Evermore Chemical Industry

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. Evermore Chemical Industry paid out 58% of its earnings to investors last year, a normal payout level for most businesses. 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. The good news is it paid out just 17% of its free cash flow in the last year.

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 Evermore Chemical Industry 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Evermore Chemical Industry has grown its earnings rapidly, up 52% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Evermore Chemical Industry's dividend payments are effectively flat on where they were 10 years ago.

To Sum It Up

Is Evermore Chemical Industry worth buying for its dividend? Evermore Chemical Industry's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about Evermore Chemical Industry, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. We've identified 4 warning signs with Evermore Chemical Industry (at least 1 which makes us a bit uncomfortable), and understanding them should be part of your investment process.

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.