ChipMOS TECHNOLOGIES INC. (TWSE:8150) Is About To Go Ex-Dividend, And It Pays A 3.9% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ChipMOS TECHNOLOGIES INC. (TWSE:8150) is about to trade ex-dividend in the next 3 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 ChipMOS TECHNOLOGIES' shares before the 27th of June to receive the dividend, which will be paid on the 19th of July.

The company's next dividend payment will be NT$1.80 per share, and in the last 12 months, the company paid a total of NT$1.80 per share. Based on the last year's worth of payments, ChipMOS TECHNOLOGIES stock has a trailing yield of around 3.9% on the current share price of NT$45.70. 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 ChipMOS TECHNOLOGIES has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for ChipMOS TECHNOLOGIES

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. ChipMOS TECHNOLOGIES is paying out an acceptable 61% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 51% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that ChipMOS TECHNOLOGIES'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 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. For this reason, we're glad to see ChipMOS TECHNOLOGIES's earnings per share have risen 12% per annum over the last five years. ChipMOS TECHNOLOGIES has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ChipMOS TECHNOLOGIES's dividend payments per share have declined at 4.1% per year on average over the past nine years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

To Sum It Up

Has ChipMOS TECHNOLOGIES got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see ChipMOS TECHNOLOGIES's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 61% and 51% respectively. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in ChipMOS TECHNOLOGIES for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for ChipMOS TECHNOLOGIES that you should be aware of before investing in their shares.

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