Wan Hwa Enterprise Company Ltd. (TWSE:2701) Goes Ex-Dividend Soon

Wan Hwa Enterprise Company Ltd. (TWSE:2701) stock is about to trade ex-dividend in 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a 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 Wan Hwa Enterprise's shares on or after the 4th of September will not receive the dividend, which will be paid on the 7th of October.

The company's next dividend payment will be NT$0.28 per share, on the back of last year when the company paid a total of NT$0.28 to shareholders. Based on the last year's worth of payments, Wan Hwa Enterprise stock has a trailing yield of around 2.2% on the current share price of NT$13.00. If you buy this business for its dividend, you should have an idea of whether Wan Hwa Enterprise's dividend is reliable and sustainable. As a result, readers should always check whether Wan Hwa Enterprise has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Wan Hwa Enterprise

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. That's why it's good to see Wan Hwa Enterprise paying out a modest 48% of its earnings. A useful secondary check can be to evaluate whether Wan Hwa Enterprise generated enough free cash flow to afford its dividend. Over the last year it paid out 69% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Wan Hwa Enterprise'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 Wan Hwa Enterprise paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Wan Hwa Enterprise's earnings are down 4.3% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Wan Hwa Enterprise has increased its dividend at approximately 11% a year on average.

Final Takeaway

Is Wan Hwa Enterprise worth buying for its dividend? Earnings per share have fallen significantly, although at least Wan Hwa Enterprise paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. In summary, it's hard to get excited about Wan Hwa Enterprise from a dividend perspective.

However if you're still interested in Wan Hwa Enterprise as a potential investment, you should definitely consider some of the risks involved with Wan Hwa Enterprise. We've identified 2 warning signs with Wan Hwa Enterprise (at least 1 which is a bit concerning), and understanding them should be part of your investment process.

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.