Kinko Optical Co., Ltd. (TWSE:6209) Goes Ex-Dividend Soon

Readers hoping to buy Kinko Optical Co., Ltd. (TWSE:6209) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Kinko Optical's shares before the 29th of August to receive the dividend, which will be paid on the 20th of September.

The company's upcoming dividend is NT$0.49987501 a share, following on from the last 12 months, when the company distributed a total of NT$0.50 per share to shareholders. Based on the last year's worth of payments, Kinko Optical stock has a trailing yield of around 1.9% on the current share price of NT$26.60. If you buy this business for its dividend, you should have an idea of whether Kinko Optical's dividend is reliable and sustainable. So we need to investigate whether Kinko Optical can afford its dividend, and if the dividend could grow.

See our latest analysis for Kinko Optical

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. Kinko Optical lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Kinko Optical reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kinko Optical has seen its dividend decline 1.8% per annum on average over the past 10 years, which is not great to see.

We update our analysis on Kinko Optical every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Has Kinko Optical got what it takes to maintain its dividend payments? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. All things considered, we are not particularly enthused about Kinko Optical from a dividend perspective.

In light of that, while Kinko Optical has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Kinko Optical and understanding them should be part of your investment process.

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.