Should Income Investors Look At King Yuan Electronics Co., Ltd. (TWSE:2449) Before Its Ex-Dividend?

Readers hoping to buy King Yuan Electronics Co., Ltd. (TWSE:2449) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Meaning, you will need to purchase King Yuan Electronics' shares before the 16th of July to receive the dividend, which will be paid on the 14th of August.

The company's next dividend payment will be NT$3.20 per share, and in the last 12 months, the company paid a total of NT$3.20 per share. Based on the last year's worth of payments, King Yuan Electronics stock has a trailing yield of around 2.4% on the current share price of NT$131.00. 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 King Yuan Electronics has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for King Yuan Electronics

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. King Yuan Electronics paid out more than half (65%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether King Yuan Electronics generated enough free cash flow to afford its dividend. Dividends consumed 65% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that King Yuan Electronics'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see King Yuan Electronics's earnings have been skyrocketing, up 27% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, King Yuan Electronics has lifted its dividend by approximately 11% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is King Yuan Electronics an attractive dividend stock, or better left on the shelf? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see King Yuan Electronics's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 65% and 65% respectively. In summary, it's hard to get excited about King Yuan Electronics from a dividend perspective.

Ever wonder what the future holds for King Yuan Electronics? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.

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