ELAN Microelectronics Corporation (TWSE:2458) Will Pay A NT$4.06989 Dividend In Four Days

ELAN Microelectronics Corporation (TWSE:2458) stock is about to trade ex-dividend in four 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase ELAN Microelectronics' shares on or after the 25th of September, you won't be eligible to receive the dividend, when it is paid on the 18th of October.

The company's next dividend payment will be NT$4.06989 per share, and in the last 12 months, the company paid a total of NT$8.00 per share. Calculating the last year's worth of payments shows that ELAN Microelectronics has a trailing yield of 5.5% on the current share price of NT$146.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for ELAN Microelectronics

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ELAN Microelectronics is paying out an acceptable 73% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether ELAN Microelectronics generated enough free cash flow to afford its dividend. Dividends consumed 59% 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 ELAN Microelectronics'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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, ELAN Microelectronics's earnings per share have been growing at 18% a year for the past five years. ELAN Microelectronics has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ELAN Microelectronics has delivered 4.8% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Should investors buy ELAN Microelectronics for the upcoming dividend? 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 ELAN Microelectronics's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 73% and 59% respectively. All things considered, we are not particularly enthused about ELAN Microelectronics from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for ELAN Microelectronics that we recommend you consider before investing in the business.

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