Is It Smart To Buy MiTAC Holdings Corporation (TPE:3706) Before It Goes Ex-Dividend?

By
Simply Wall St
Published
March 20, 2021
TWSE:3706
Source: Shutterstock

It looks like MiTAC Holdings Corporation (TPE:3706) is about to go ex-dividend in the next three days. Ex-dividend means that investors that purchase the stock on or after the 25th of March will not receive this dividend, which will be paid on the 29th of April.

MiTAC Holdings's next dividend payment will be NT$1.00 per share. Last year, in total, the company distributed NT$1.00 to shareholders. Last year's total dividend payments show that MiTAC Holdings has a trailing yield of 3.4% on the current share price of NT$29.1. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether MiTAC Holdings has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for MiTAC Holdings

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. MiTAC Holdings paid out a comfortable 41% of its profit last year. 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 more than half (59%) of its free cash flow in the past year, which is within an average 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 how much of its profit MiTAC Holdings paid out over the last 12 months.

historic-dividend
TSEC:3706 Historic Dividend March 21st 2021

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see MiTAC Holdings's earnings per share have risen 10% per annum over the last five years. MiTAC Holdings 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past seven years, MiTAC Holdings has increased its dividend at approximately 14% 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.

To Sum It Up

Should investors buy MiTAC Holdings for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, MiTAC Holdings paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

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

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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