Is It Worth Considering ASE Technology Holding Co., Ltd. (TWSE:3711) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ASE Technology Holding Co., Ltd. (TWSE:3711) is about to trade ex-dividend in the next 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, ASE Technology Holding investors that purchase the stock on or after the 1st of July will not receive the dividend, which will be paid on the 26th of July.

The company's next dividend payment will be NT$5.202282 per share, on the back of last year when the company paid a total of NT$5.20 to shareholders. Calculating the last year's worth of payments shows that ASE Technology Holding has a trailing yield of 3.0% on the current share price of NT$172.50. If you buy this business for its dividend, you should have an idea of whether ASE Technology Holding's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for ASE Technology Holding

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. ASE Technology Holding paid out more than half (71%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 78% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see ASE Technology Holding earnings per share are up 4.2% per annum over the last five years. A high payout ratio of 71% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, ASE Technology Holding could be signalling that its future growth prospects are thin.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past five years, ASE Technology Holding has increased its dividend at approximately 16% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid ASE Technology Holding? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

However if you're still interested in ASE Technology Holding as a potential investment, you should definitely consider some of the risks involved with ASE Technology Holding. For example, we've found 2 warning signs for ASE Technology Holding that we recommend you consider before investing in the business.

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