Chang Wah Technology Co., Ltd. (GTSM:6548) Will Pay A NT$0.40 Dividend In Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Chang Wah Technology Co., Ltd. (GTSM:6548) is about to trade ex-dividend in the next three days. Ex-dividend means that investors that purchase the stock on or after the 17th of December will not receive this dividend, which will be paid on the 13th of January.

Chang Wah Technology's upcoming dividend is NT$0.40 a share, following on from the last 12 months, when the company distributed a total of NT$1.80 per share to shareholders. Looking at the last 12 months of distributions, Chang Wah Technology has a trailing yield of approximately 3.2% on its current stock price of NT$55.9. If you buy this business for its dividend, you should have an idea of whether Chang Wah Technology's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Chang Wah Technology

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. Chang Wah Technology paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Chang Wah Technology generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (80%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Chang Wah Technology'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 Chang Wah Technology paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Chang Wah Technology has grown its earnings rapidly, up 39% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Chang Wah Technology has delivered an average of 43% per year annual increase in its dividend, based on the past five years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has Chang Wah Technology got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Chang Wah Technology's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 60% and 80% respectively. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

In light of that, while Chang Wah Technology has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for Chang Wah Technology and you should be aware of them before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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