Should Income Investors Look At Vivotek Inc. (TWSE:3454) Before Its Ex-Dividend?

Vivotek Inc. (TWSE:3454) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Vivotek's shares on or after the 30th of July, you won't be eligible to receive the dividend, when it is paid on the 30th of August.

The company's next dividend payment will be NT$3.80 per share, and in the last 12 months, the company paid a total of NT$3.80 per share. Calculating the last year's worth of payments shows that Vivotek has a trailing yield of 2.7% on the current share price of NT$138.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Vivotek

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Vivotek paid out 92% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. A useful secondary check can be to evaluate whether Vivotek generated enough free cash flow to afford its dividend. Fortunately, it paid out only 28% of its free cash flow in the past year.

It's good to see that while Vivotek's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

Click here to see how much of its profit Vivotek paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Vivotek's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Vivotek's dividend payments per share have declined at 2.4% per year on average over the past 10 years, which is uninspiring.

Final Takeaway

Is Vivotek an attractive dividend stock, or better left on the shelf? Vivotek's earnings per share are effectively flat, and it is paying out just 28% of its cash flow but 92% of its income. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Vivotek's dividend merits.

If you're not too concerned about Vivotek's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Vivotek has 2 warning signs we think 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.

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