Infortrend Technology, Inc. (TWSE:2495) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Infortrend Technology, Inc. (TWSE:2495) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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 Infortrend Technology's shares before the 25th of July to receive the dividend, which will be paid on the 27th of August.

The company's upcoming dividend is NT$0.70 a share, following on from the last 12 months, when the company distributed a total of NT$0.70 per share to shareholders. Calculating the last year's worth of payments shows that Infortrend Technology has a trailing yield of 2.2% on the current share price of NT$32.40. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Infortrend Technology has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Infortrend Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 79% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. 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. It paid out more than half (64%) of its free cash flow in the past year, which is within an average range for most companies.

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 Infortrend Technology 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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Infortrend Technology's earnings have been skyrocketing, up 20% per annum for the past five years. The company is paying out more than three-quarters of its earnings, but it is also generating strong earnings growth.

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, Infortrend Technology has lifted its dividend by approximately 17% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Infortrend Technology got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Infortrend Technology's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 79% and 64% respectively. In summary, while it has some positive characteristics, we're not inclined to race out and buy Infortrend Technology today.

While it's tempting to invest in Infortrend Technology for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 3 warning signs for Infortrend Technology you should be aware of.

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

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