ASUSTeK Computer Inc. (TWSE:2357) Will Pay A NT$17.00 Dividend In Four Days

ASUSTeK Computer Inc. (TWSE:2357) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase ASUSTeK Computer's shares on or after the 3rd of July will not receive the dividend, which will be paid on the 25th of July.

The company's next dividend payment will be NT$17.00 per share, and in the last 12 months, the company paid a total of NT$17.00 per share. Based on the last year's worth of payments, ASUSTeK Computer has a trailing yield of 3.4% on the current stock price of NT$503.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for ASUSTeK Computer

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ASUSTeK Computer is paying out an acceptable 55% 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. Fortunately, it paid out only 48% of its free cash flow in the past year.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at ASUSTeK Computer, with earnings per share up 7.2% on average over the last five years. Decent historical earnings per share growth suggests ASUSTeK Computer has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ASUSTeK Computer has seen its dividend decline 1.2% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

Should investors buy ASUSTeK Computer for the upcoming dividend? Earnings per share growth has been modest and ASUSTeK Computer paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. To summarise, ASUSTeK Computer looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in ASUSTeK Computer for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for ASUSTeK Computer that we recommend you consider before investing in the business.

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