Don't Buy Radium Life Tech. Co., Ltd. (TWSE:2547) For Its Next Dividend Without Doing These Checks

It looks like Radium Life Tech. Co., Ltd. (TWSE:2547) is about to go ex-dividend in the next three 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. 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 Radium Life Tech's shares on or after the 15th of August will not receive the dividend, which will be paid on the 6th of September.

The company's next dividend payment will be NT$0.25 per share. Last year, in total, the company distributed NT$0.25 to shareholders. Based on the last year's worth of payments, Radium Life Tech has a trailing yield of 2.4% on the current stock price of NT$10.35. If you buy this business for its dividend, you should have an idea of whether Radium Life Tech's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Radium Life Tech

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. Radium Life Tech's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Radium Life Tech paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see how much of its profit Radium Life Tech paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Radium Life Tech was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Radium Life Tech also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Radium Life Tech has seen its dividend decline 10% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Get our latest analysis on Radium Life Tech's balance sheet health here.

To Sum It Up

Has Radium Life Tech got what it takes to maintain its dividend payments? This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

With that being said, if you're still considering Radium Life Tech as an investment, you'll find it beneficial to know what risks this stock is facing. We've identified 4 warning signs with Radium Life Tech (at least 3 which are a bit concerning), and understanding these should be part of your investment process.

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.