There's A Lot To Like About Brightek Optoelectronic's (TWSE:5244) Upcoming NT$1.20 Dividend

Brightek Optoelectronic Co., Ltd. (TWSE:5244) stock is about to trade ex-dividend in 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Brightek Optoelectronic's shares before the 18th of June in order to be eligible for the dividend, which will be paid on the 23rd of July.

The company's upcoming dividend is NT$1.20 a share, following on from the last 12 months, when the company distributed a total of NT$1.20 per share to shareholders. Based on the last year's worth of payments, Brightek Optoelectronic stock has a trailing yield of around 2.6% on the current share price of NT$45.35. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Brightek Optoelectronic has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Brightek Optoelectronic

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Brightek Optoelectronic's payout ratio is modest, at just 48% of profit. 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. Over the last year it paid out 66% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Brightek Optoelectronic'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 how much of its profit Brightek Optoelectronic paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Brightek Optoelectronic's earnings per share have been growing at 11% a year for the past five years. Brightek Optoelectronic is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Brightek Optoelectronic has lifted its dividend by approximately 15% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Brightek Optoelectronic an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Brightek Optoelectronic looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Brightek Optoelectronic has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Brightek Optoelectronic that you should be aware of before investing in their shares.

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.