Unitech Computer Co., Ltd. (TWSE:2414) Goes Ex-Dividend Soon

Readers hoping to buy Unitech Computer Co., Ltd. (TWSE:2414) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Unitech Computer's shares before the 25th of July to receive the dividend, which will be paid on the 9th of August.

The company's next dividend payment will be NT$2.20 per share, on the back of last year when the company paid a total of NT$2.20 to shareholders. Based on the last year's worth of payments, Unitech Computer stock has a trailing yield of around 5.6% on the current share price of NT$39.60. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Unitech Computer can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Unitech Computer

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. Last year, Unitech Computer paid out 94% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 40% of its free cash flow in the past year.

It's good to see that while Unitech Computer's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

Click here to see how much of its profit Unitech Computer 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Unitech Computer, with earnings per share up 8.1% on average over the last five years.

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, Unitech Computer has lifted its dividend by approximately 6.7% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has Unitech Computer got what it takes to maintain its dividend payments? Earnings per share have grown modestly, and last year Unitech Computer paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So if you want to do more digging on Unitech Computer, you'll find it worthwhile knowing the risks that this stock faces. In terms of investment risks, we've identified 1 warning sign with Unitech Computer and understanding them should be part of your investment process.

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