We Wouldn't Be Too Quick To Buy Tyntek Corporation (TWSE:2426) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Tyntek Corporation (TWSE:2426) is about to go ex-dividend in just 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase Tyntek's shares on or after the 26th of August will not receive the dividend, which will be paid on the 13th of September.

The company's next dividend payment will be NT$0.20 per share, on the back of last year when the company paid a total of NT$0.20 to shareholders. Looking at the last 12 months of distributions, Tyntek has a trailing yield of approximately 1.1% on its current stock price of NT$19.00. If you buy this business for its dividend, you should have an idea of whether Tyntek's dividend is reliable and sustainable. So we need to investigate whether Tyntek can afford its dividend, and if the dividend could grow.

View our latest analysis for Tyntek

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 81% 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. It could become a concern if earnings started to decline.

Click here to see how much of its profit Tyntek 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. Tyntek's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 33% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tyntek's dividend payments per share have declined at 15% per year on average over the past nine 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

Has Tyntek got what it takes to maintain its dividend payments? We're not overly enthused to see Tyntek's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.

If you're not too concerned about Tyntek's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 1 warning sign for Tyntek and you should be aware of it before buying any shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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

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.