Wah Lee Industrial Corporation (TWSE:3010) Stock Goes Ex-Dividend In Just Four Days

Wah Lee Industrial Corporation (TWSE:3010) stock is about to trade ex-dividend in 4 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Wah Lee Industrial's shares on or after the 24th of July, you won't be eligible to receive the dividend, when it is paid on the 15th of August.

The company's next dividend payment will be NT$4.950375 per share, on the back of last year when the company paid a total of NT$4.95 to shareholders. Looking at the last 12 months of distributions, Wah Lee Industrial has a trailing yield of approximately 3.3% on its current stock price of NT$150.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Wah Lee Industrial

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. Wah Lee Industrial is paying out an acceptable 52% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Wah Lee Industrial generated enough free cash flow to afford its dividend. It paid out 99% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Wah Lee Industrial paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Wah Lee Industrial's ability to maintain its dividend.

Click here to see how much of its profit Wah Lee 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 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 Wah Lee Industrial, with earnings per share up 9.6% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Wah Lee Industrial has delivered 5.3% dividend growth per year on average over the past 10 years. 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.

Final Takeaway

Should investors buy Wah Lee Industrial for the upcoming dividend? Earnings per share have grown somewhat, although Wah Lee Industrial paid out over half its profits and the dividend was not well covered by free cash flow. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that in mind though, if the poor dividend characteristics of Wah Lee Industrial don't faze you, it's worth being mindful of the risks involved with this business. For example - Wah Lee Industrial has 1 warning sign we think you should be aware of.

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