Why You Might Be Interested In Thinking Electronic Industrial Co., Ltd. (TWSE:2428) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Thinking Electronic Industrial Co., Ltd. (TWSE:2428) is about to go ex-dividend in just four days. 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. Thus, you can purchase Thinking Electronic Industrial's shares before the 26th of August in order to receive the dividend, which the company will pay on the 20th of September.

The company's next dividend payment will be NT$5.20 per share. Last year, in total, the company distributed NT$5.20 to shareholders. Calculating the last year's worth of payments shows that Thinking Electronic Industrial has a trailing yield of 3.0% on the current share price of NT$173.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Thinking Electronic Industrial

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 Thinking Electronic Industrial's payout ratio is modest, at just 45% of profit. A useful secondary check can be to evaluate whether Thinking Electronic Industrial generated enough free cash flow to afford its dividend. 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 how much of its profit Thinking Electronic Industrial 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Thinking Electronic Industrial, with earnings per share up 8.3% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Thinking Electronic Industrial has increased its dividend at approximately 10% 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.

The Bottom Line

From a dividend perspective, should investors buy or avoid Thinking Electronic Industrial? Earnings per share have been growing moderately, and Thinking Electronic Industrial is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Thinking Electronic Industrial is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Thinking Electronic Industrial, and we would prioritise taking a closer look at it.

Keen to explore more data on Thinking Electronic Industrial's financial performance? Check out our visualisation of its historical revenue and earnings growth.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.