TaiSol Electronics Co., Ltd. (TWSE:3338) Looks Interesting, And It's About To Pay A Dividend

TaiSol Electronics Co., Ltd. (TWSE:3338) stock is about to trade ex-dividend in 3 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. This means that investors who purchase TaiSol Electronics' shares on or after the 20th of June will not receive the dividend, which will be paid on the 25th of July.

The company's next dividend payment will be NT$2.00 per share, on the back of last year when the company paid a total of NT$2.00 to shareholders. Last year's total dividend payments show that TaiSol Electronics has a trailing yield of 2.3% on the current share price of NT$86.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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 TaiSol Electronics

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. TaiSol Electronics paid out 61% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether TaiSol Electronics generated enough free cash flow to afford its dividend. Fortunately, it paid out only 38% of its free cash flow in the past year.

It's positive to see that TaiSol Electronics's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit TaiSol Electronics 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. Fortunately for readers, TaiSol Electronics's earnings per share have been growing at 13% a year for the past five years. TaiSol Electronics is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. TaiSol Electronics has delivered an average of 2.9% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because TaiSol Electronics is keeping back more of its profits to grow the business.

The Bottom Line

Is TaiSol Electronics an attractive dividend stock, or better left on the shelf? TaiSol Electronics's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. TaiSol Electronics looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while TaiSol Electronics has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for TaiSol Electronics (1 makes us a bit uncomfortable!) that you ought to be aware of before buying the shares.

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