Is It Smart To Buy Advancetek Enterprise Co.,Ltd. (TWSE:1442) Before It Goes Ex-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 Advancetek Enterprise Co.,Ltd. (TWSE:1442) is about to go ex-dividend in just three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Meaning, you will need to purchase Advancetek EnterpriseLtd's shares before the 19th of August to receive the dividend, which will be paid on the 12th of September.

The company's next dividend payment will be NT$3.50 per share, and in the last 12 months, the company paid a total of NT$3.50 per share. Looking at the last 12 months of distributions, Advancetek EnterpriseLtd has a trailing yield of approximately 5.2% on its current stock price of NT$66.90. If you buy this business for its dividend, you should have an idea of whether Advancetek EnterpriseLtd's dividend is reliable and sustainable. So we need to investigate whether Advancetek EnterpriseLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for Advancetek EnterpriseLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Advancetek EnterpriseLtd paid out more than half (61%) 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. Luckily it paid out just 19% of its free 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 Advancetek EnterpriseLtd 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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Advancetek EnterpriseLtd's earnings have been skyrocketing, up 70% per annum 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Advancetek EnterpriseLtd has lifted its dividend by approximately 0.6% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Is Advancetek EnterpriseLtd an attractive dividend stock, or better left on the shelf? Advancetek EnterpriseLtd'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 Advancetek EnterpriseLtd is facing. For example - Advancetek EnterpriseLtd has 2 warning signs we think you should be aware of.

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.