Two Days Left Until Chong Hong Construction Co., Ltd. (TWSE:5534) Trades Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Chong Hong Construction Co., Ltd. (TWSE:5534) is about to trade ex-dividend in the next two 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Chong Hong Construction's shares before the 22nd of August in order to be eligible for the dividend, which will be paid on the 26th of September.

The company's next dividend payment will be NT$5.50 per share, and in the last 12 months, the company paid a total of NT$5.50 per share. Based on the last year's worth of payments, Chong Hong Construction has a trailing yield of 4.3% on the current stock price of NT$129.00. If you buy this business for its dividend, you should have an idea of whether Chong Hong Construction's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Chong Hong Construction

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Chong Hong Construction is paying out an acceptable 74% of its profit, a common payout level among 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. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.

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 Chong Hong Construction paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. 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 Chong Hong Construction's 12% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Chong Hong Construction's dividend payments per share have declined at 4.9% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Is Chong Hong Construction worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Chong Hong Construction's dividend merits.

If you want to look further into Chong Hong Construction, it's worth knowing the risks this business faces. Our analysis shows 3 warning signs for Chong Hong Construction and you should be aware of these before buying any shares.

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.