Chicony Electronics Co., Ltd. (TWSE:2385) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Chicony Electronics Co., Ltd. (TWSE:2385) is about to trade ex-dividend in the next four 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 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. In other words, investors can purchase Chicony Electronics' shares before the 18th of June in order to be eligible for the dividend, which will be paid on the 12th of July.

The company's next dividend payment will be NT$7.80 per share, and in the last 12 months, the company paid a total of NT$7.80 per share. Last year's total dividend payments show that Chicony Electronics has a trailing yield of 4.1% on the current share price of NT$189.50. If you buy this business for its dividend, you should have an idea of whether Chicony Electronics's dividend is reliable and sustainable. So we need to investigate whether Chicony Electronics can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Chicony Electronics

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. Chicony Electronics is paying out an acceptable 73% of its profit, a common payout level among most companies. 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. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.

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?

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. For this reason, we're glad to see Chicony Electronics's earnings per share have risen 15% per annum over the last five years. Chicony Electronics is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. 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 10 years, Chicony Electronics has increased its dividend at approximately 5.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Chicony Electronics is keeping back more of its profits to grow the business.

The Bottom Line

From a dividend perspective, should investors buy or avoid Chicony Electronics? We like Chicony Electronics's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

Wondering what the future holds for Chicony Electronics? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.