Here's Why We're Wary Of Buying Sweeten Real Estate DevelopmentLtd's (TWSE:5525) For Its Upcoming Dividend

It looks like Sweeten Real Estate Development Co.,Ltd. (TWSE:5525) is about to go ex-dividend in the next three 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. 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 Sweeten Real Estate DevelopmentLtd's shares before the 18th of July to receive the dividend, which will be paid on the 16th of August.

The company's next dividend payment will be NT$1.20 per share, and in the last 12 months, the company paid a total of NT$1.20 per share. Based on the last year's worth of payments, Sweeten Real Estate DevelopmentLtd stock has a trailing yield of around 3.0% on the current share price of NT$39.90. 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! As a result, readers should always check whether Sweeten Real Estate DevelopmentLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Sweeten Real Estate DevelopmentLtd

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Sweeten Real Estate DevelopmentLtd is paying out an acceptable 50% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 85% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 Sweeten Real Estate DevelopmentLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Sweeten Real Estate DevelopmentLtd's 6.9% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sweeten Real Estate DevelopmentLtd has seen its dividend decline 1.8% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

From a dividend perspective, should investors buy or avoid Sweeten Real Estate DevelopmentLtd? While earnings per share are shrinking, it's encouraging to see that at least Sweeten Real Estate DevelopmentLtd's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

So if you're still interested in Sweeten Real Estate DevelopmentLtd despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To help with this, we've discovered 2 warning signs for Sweeten Real Estate DevelopmentLtd (1 is a bit concerning!) that you ought to be aware of before buying the shares.

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.

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