Shin Shin Co Ltd. (TWSE:2901) Pays A NT$0.36053153 Dividend In Just Four Days

It looks like Shin Shin Co Ltd. (TWSE:2901) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Accordingly, Shin Shin Co investors that purchase the stock on or after the 4th of September will not receive the dividend, which will be paid on the 25th of September.

The company's upcoming dividend is NT$0.36053153 a share, following on from the last 12 months, when the company distributed a total of NT$0.36 per share to shareholders. Last year's total dividend payments show that Shin Shin Co has a trailing yield of 1.3% on the current share price of NT$28.00. 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 Shin Shin Co has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Shin Shin Co

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. It paid out 81% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. 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. Thankfully its dividend payments took up just 39% of the free cash flow it generated, which is a comfortable payout ratio.

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 Shin Shin Co paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Shin Shin Co's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. A payout ratio of 81% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Shin Shin Co dividends are largely the same as they were 10 years ago.

Final Takeaway

Is Shin Shin Co an attractive dividend stock, or better left on the shelf? Earnings per share have been flat and Shin Shin Co's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. In summary, while it has some positive characteristics, we're not inclined to race out and buy Shin Shin Co today.

While it's tempting to invest in Shin Shin Co for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 3 warning signs for Shin Shin Co (1 makes us a bit uncomfortable!) 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.