Why It Might Not Make Sense To Buy ENNOSTAR Inc. (TWSE:3714) For Its Upcoming Dividend

Readers hoping to buy ENNOSTAR Inc. (TWSE:3714) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Meaning, you will need to purchase ENNOSTAR's shares before the 26th of June to receive the dividend, which will be paid on the 26th of July.

The company's next dividend payment will be NT$0.91829415 per share, on the back of last year when the company paid a total of NT$0.90 to shareholders. Last year's total dividend payments show that ENNOSTAR has a trailing yield of 2.0% on the current share price of NT$45.10. If you buy this business for its dividend, you should have an idea of whether ENNOSTAR's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for ENNOSTAR

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. ENNOSTAR paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.

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. ENNOSTAR reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. ENNOSTAR's dividend payments per share have declined at 33% per year on average over the past two years, which is uninspiring.

We update our analysis on ENNOSTAR every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Is ENNOSTAR worth buying for its dividend? In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

However if you're still interested in ENNOSTAR as a potential investment, you should definitely consider some of the risks involved with ENNOSTAR. To that end, you should learn about the 2 warning signs we've spotted with ENNOSTAR (including 1 which is a bit unpleasant).

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.

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