Only Three Days Left To Cash In On Chang Wah Electromaterials' (TPE:8070) Dividend

Chang Wah Electromaterials Inc. (TPE:8070) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 17th of December to receive the dividend, which will be paid on the 15th of January.

Chang Wah Electromaterials's upcoming dividend is NT$0.26 a share, following on from the last 12 months, when the company distributed a total of NT$1.26 per share to shareholders. Based on the last year's worth of payments, Chang Wah Electromaterials stock has a trailing yield of around 3.9% on the current share price of NT$32.1. If you buy this business for its dividend, you should have an idea of whether Chang Wah Electromaterials's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Chang Wah Electromaterials

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Chang Wah Electromaterials paid out more than half (72%) of its earnings last year, which is a regular payout ratio for 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. It paid out more than half (64%) 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 Chang Wah Electromaterials paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Chang Wah Electromaterials's earnings have been skyrocketing, up 20% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Chang Wah Electromaterials could have strong prospects for future increases to the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Chang Wah Electromaterials has lifted its dividend by approximately 7.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Chang Wah Electromaterials? 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 Chang Wah Electromaterials's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 72% and 64% respectively. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 3 warning signs for Chang Wah Electromaterials (1 is potentially serious!) that deserve your attention before investing in the shares.

If you're in the market for dividend stocks, we recommend checking our list of top 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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