MiTAC Holdings Corporation (TWSE:3706) Stock Goes Ex-Dividend In Just Three Days

It looks like MiTAC Holdings Corporation (TWSE:3706) is about to go ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase MiTAC Holdings' shares before the 28th of March in order to be eligible for the dividend, which will be paid on the 30th of April.

The company's next dividend payment will be NT$1.30 per share, on the back of last year when the company paid a total of NT$1.30 to shareholders. Last year's total dividend payments show that MiTAC Holdings has a trailing yield of 2.4% on the current share price of NT$54.00. If you buy this business for its dividend, you should have an idea of whether MiTAC Holdings's dividend is reliable and sustainable. So we need to investigate whether MiTAC Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for MiTAC Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 88% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 38% of its free cash flow as dividends, a comfortable payout level 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 how much of its profit MiTAC Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see MiTAC Holdings's earnings per share have dropped 12% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, MiTAC Holdings has lifted its dividend by approximately 13% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. MiTAC Holdings is already paying out 88% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.

To Sum It Up

Has MiTAC Holdings got what it takes to maintain its dividend payments? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, it's hard to get excited about MiTAC Holdings from a dividend perspective.

With that being said, if dividends aren't your biggest concern with MiTAC Holdings, you should know about the other risks facing this business. Our analysis shows 3 warning signs for MiTAC Holdings and you should be aware of them before buying any 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.