Should You Buy Maxigen Biotech Inc. (TWSE:1783) For Its Upcoming Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Maxigen Biotech Inc. (TWSE:1783) is about to go ex-dividend in just 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 Maxigen Biotech's shares before the 23rd of July to receive the dividend, which will be paid on the 16th of August.

The company's upcoming dividend is NT$0.99873133 a share, following on from the last 12 months, when the company distributed a total of NT$1.00 per share to shareholders. Last year's total dividend payments show that Maxigen Biotech has a trailing yield of 2.1% on the current share price of NT$47.95. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Maxigen Biotech can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Maxigen Biotech

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. Maxigen Biotech paid out 59% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Maxigen Biotech generated enough free cash flow to afford its dividend. It paid out 24% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Maxigen Biotech'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 Maxigen Biotech paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Maxigen Biotech's earnings per share have been growing at 19% a year for the past five years. Maxigen Biotech is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, six years ago, Maxigen Biotech has lifted its dividend by approximately 40% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Maxigen Biotech? Maxigen Biotech'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. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Maxigen Biotech is facing. For example - Maxigen Biotech has 1 warning sign we think you should be aware of.

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