Only Three Days Left To Cash In On LARGAN PrecisionLtd's (TWSE:3008) Dividend

Readers hoping to buy LARGAN Precision Co.,Ltd (TWSE:3008) 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase LARGAN PrecisionLtd's shares before the 15th of August in order to receive the dividend, which the company will pay on the 12th of September.

The company's next dividend payment will be NT$40.00 per share, on the back of last year when the company paid a total of NT$81.00 to shareholders. Based on the last year's worth of payments, LARGAN PrecisionLtd stock has a trailing yield of around 2.9% on the current share price of NT$2755.00. 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 LARGAN PrecisionLtd can afford its dividend, and if the dividend could grow.

Check out our latest analysis for LARGAN PrecisionLtd

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately LARGAN PrecisionLtd's payout ratio is modest, at just 50% of profit. A useful secondary check can be to evaluate whether LARGAN PrecisionLtd generated enough free cash flow to afford its dividend. Over the last year it paid out 52% of its free cash flow as dividends, within the usual 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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that LARGAN PrecisionLtd's earnings are down 2.4% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, LARGAN PrecisionLtd has increased its dividend at approximately 17% a year on average.

The Bottom Line

Should investors buy LARGAN PrecisionLtd for the upcoming dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. To summarise, LARGAN PrecisionLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So if you want to do more digging on LARGAN PrecisionLtd, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 1 warning sign for LARGAN PrecisionLtd you should be aware of.

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.