Here's What We Like About Mayer Steel Pipe's (TWSE:2020) Upcoming Dividend

It looks like Mayer Steel Pipe Corporation (TWSE:2020) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Mayer Steel Pipe's shares before the 12th of June to receive the dividend, which will be paid on the 5th of July.

The company's upcoming dividend is NT$2.00 a share, following on from the last 12 months, when the company distributed a total of NT$2.00 per share to shareholders. Last year's total dividend payments show that Mayer Steel Pipe has a trailing yield of 5.0% on the current share price of NT$40.20. If you buy this business for its dividend, you should have an idea of whether Mayer Steel Pipe's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Mayer Steel Pipe

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Mayer Steel Pipe paid out a comfortable 35% of its profit last year. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 18% of its cash flow 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 Mayer Steel Pipe paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Mayer Steel Pipe's earnings have been skyrocketing, up 34% per annum for the past five years. Mayer Steel Pipe is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Mayer Steel Pipe has lifted its dividend by approximately 27% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

From a dividend perspective, should investors buy or avoid Mayer Steel Pipe? Mayer Steel Pipe has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Mayer Steel Pipe looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Mayer Steel Pipe looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for Mayer Steel Pipe 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.