Champion Microelectronic Corporation (TWSE:3257) Will Pay A NT$3.00 Dividend In Four Days

Champion Microelectronic Corporation (TWSE:3257) is about to trade ex-dividend in the next 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. 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. In other words, investors can purchase Champion Microelectronic's shares before the 2nd of April in order to be eligible for the dividend, which will be paid on the 7th of May.

The company's upcoming dividend is NT$3.00 a share, following on from the last 12 months, when the company distributed a total of NT$3.00 per share to shareholders. Calculating the last year's worth of payments shows that Champion Microelectronic has a trailing yield of 4.2% on the current share price of NT$71.70. If you buy this business for its dividend, you should have an idea of whether Champion Microelectronic'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 Champion Microelectronic

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Champion Microelectronic paid out 96% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 22% of its free cash flow last year.

It's good to see that while Champion Microelectronic's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

Click here to see how much of its profit Champion Microelectronic paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Champion Microelectronic's earnings per share have risen 17% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Champion Microelectronic has increased its dividend at approximately 6.3% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Champion Microelectronic for the upcoming dividend? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Champion Microelectronic's paying out such a high percentage of its profit. 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 not all that optimistic on its dividend prospects.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for Champion Microelectronic you should know about.

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.