Nan Pao Resins Chemical Co., Ltd. (TWSE:4766) Passed Our Checks, And It's About To Pay A NT$15.00 Dividend

Nan Pao Resins Chemical Co., Ltd. (TWSE:4766) stock is about to trade ex-dividend in three 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. 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. This means that investors who purchase Nan Pao Resins Chemical's shares on or after the 20th of June will not receive the dividend, which will be paid on the 19th of July.

The company's next dividend payment will be NT$15.00 per share. Last year, in total, the company distributed NT$15.00 to shareholders. Based on the last year's worth of payments, Nan Pao Resins Chemical has a trailing yield of 4.2% on the current stock price of NT$356.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Nan Pao Resins Chemical

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Nan Pao Resins Chemical is paying out an acceptable 75% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Nan Pao Resins Chemical generated enough free cash flow to afford its dividend. Fortunately, it paid out only 42% of its free cash flow in the past year.

It's positive to see that Nan Pao Resins Chemical'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 Nan Pao Resins Chemical 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. 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 encouraging to see Nan Pao Resins Chemical has grown its earnings rapidly, up 27% 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past six years, Nan Pao Resins Chemical has increased its dividend at approximately 20% 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

Is Nan Pao Resins Chemical worth buying for its dividend? We like Nan Pao Resins Chemical's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Nan Pao Resins Chemical looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Nan Pao Resins Chemical is facing. Every company has risks, and we've spotted 1 warning sign for Nan Pao Resins Chemical you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com