Radiant Opto-Electronics Corporation (TWSE:6176) Stock Goes Ex-Dividend In Just Four Days

Radiant Opto-Electronics Corporation (TWSE:6176) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Radiant Opto-Electronics' shares before the 24th of June to receive the dividend, which will be paid on the 19th of July.

The company's next dividend payment will be NT$10.00 per share, on the back of last year when the company paid a total of NT$10.00 to shareholders. Last year's total dividend payments show that Radiant Opto-Electronics has a trailing yield of 4.7% on the current share price of NT$213.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Radiant Opto-Electronics

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Radiant Opto-Electronics is paying out an acceptable 72% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Radiant Opto-Electronics generated enough free cash flow to afford its dividend. Over the last year it paid out 69% of its free cash flow as dividends, within the usual range for most companies.

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?

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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Radiant Opto-Electronics earnings per share are up 5.2% per annum over the last five years. Decent historical earnings per share growth suggests Radiant Opto-Electronics has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Radiant Opto-Electronics has delivered an average of 3.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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

Is Radiant Opto-Electronics an attractive dividend stock, or better left on the shelf? Earnings per share have been growing modestly and Radiant Opto-Electronics paid out a bit over half of its earnings and free cash flow last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you want to look further into Radiant Opto-Electronics, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 2 warning signs for Radiant Opto-Electronics (of which 1 can't be ignored!) 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.

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

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