Just Three Days Till E-Life Corporation (TWSE:6281) Will Be Trading Ex-Dividend

E-Life Corporation (TWSE:6281) is about to trade ex-dividend in the next 3 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase E-Life's shares on or after the 22nd of March will not receive the dividend, which will be paid on the 25th of April.

The company's next dividend payment will be NT$4.50 per share, and in the last 12 months, the company paid a total of NT$4.50 per share. Calculating the last year's worth of payments shows that E-Life has a trailing yield of 5.2% on the current share price of NT$87.20. If you buy this business for its dividend, you should have an idea of whether E-Life'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 E-Life

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. Its dividend payout ratio is 88% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether E-Life generated enough free cash flow to afford its dividend. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that E-Life'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 E-Life paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see E-Life earnings per share are up 4.7% per annum over the last five years. A high payout ratio of 88% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, E-Life could be signalling that its future growth prospects are thin.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. E-Life has seen its dividend decline 0.8% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

Is E-Life worth buying for its dividend? While earnings per share growth has been modest, E-Life's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. To summarise, E-Life looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks E-Life is facing. For example - E-Life has 1 warning sign we think you should be aware of.

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.