Zero One Technology Co., Ltd. (TWSE:3029) Is About To Go Ex-Dividend, And It Pays A 3.3% Yield

Readers hoping to buy Zero One Technology Co., Ltd. (TWSE:3029) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Zero One Technology's shares before the 20th of March in order to receive the dividend, which the company will pay on the 18th of April.

The company's upcoming dividend is NT$5.00 a share, following on from the last 12 months, when the company distributed a total of NT$5.00 per share to shareholders. Calculating the last year's worth of payments shows that Zero One Technology has a trailing yield of 3.3% on the current share price of NT$151.00. If you buy this business for its dividend, you should have an idea of whether Zero One Technology's dividend is reliable and sustainable. So we need to investigate whether Zero One Technology can afford its dividend, and if the dividend could grow.

See our latest analysis for Zero One Technology

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. Zero One Technology paid out 96% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. A useful secondary check can be to evaluate whether Zero One Technology generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.

It's good to see that while Zero One Technology'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 Zero One 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. For this reason, we're glad to see Zero One Technology's earnings per share have risen 12% per annum 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. In the last 10 years, Zero One Technology has lifted its dividend by approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Zero One Technology? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Zero One Technology is paying out so much of its profit. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Zero One Technology and you should be aware of them before buying any shares.

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.