Just Four Days Till Kaimei Electronic Corp. (TWSE:2375) Will Be Trading Ex-Dividend

Kaimei Electronic Corp. (TWSE:2375) stock is about to trade ex-dividend in 4 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. In other words, investors can purchase Kaimei Electronic's shares before the 6th of August in order to be eligible for the dividend, which will be paid on the 30th of August.

The company's next dividend payment will be NT$0.80 per share. Last year, in total, the company distributed NT$1.50 to shareholders. Calculating the last year's worth of payments shows that Kaimei Electronic has a trailing yield of 1.2% on the current share price of NT$68.20. 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 Kaimei Electronic has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Kaimei Electronic

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. Fortunately Kaimei Electronic's payout ratio is modest, at just 33% of profit. A useful secondary check can be to evaluate whether Kaimei Electronic generated enough free cash flow to afford its dividend. The good news is it paid out just 16% of its free cash flow in the last 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 how much of its profit Kaimei Electronic paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Kaimei Electronic's earnings per share have plummeted approximately 41% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kaimei Electronic has delivered 7.9% dividend growth per year on average over the past 10 years.

To Sum It Up

Should investors buy Kaimei Electronic for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Kaimei Electronic today.

So while Kaimei Electronic looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 2 warning signs for Kaimei Electronic (1 is a bit unpleasant!) that deserve your attention before investing in the 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