Complex Micro Interconnection Co.,Ltd. (TWSE:6835) Goes Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Complex Micro Interconnection Co.,Ltd. (TWSE:6835) is about to go ex-dividend in just four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Complex Micro InterconnectionLtd's shares on or after the 8th of July, you won't be eligible to receive the dividend, when it is paid on the 31st of July.

The company's upcoming dividend is NT$2.00 a share, following on from the last 12 months, when the company distributed a total of NT$2.00 per share to shareholders. Calculating the last year's worth of payments shows that Complex Micro InterconnectionLtd has a trailing yield of 3.9% on the current share price of NT$51.50. If you buy this business for its dividend, you should have an idea of whether Complex Micro InterconnectionLtd's dividend is reliable and sustainable. 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 Complex Micro InterconnectionLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Complex Micro InterconnectionLtd paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. 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. Thankfully its dividend payments took up just 44% of the free cash flow it generated, which is a comfortable payout ratio.

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 Complex Micro InterconnectionLtd 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Complex Micro InterconnectionLtd, with earnings per share up 7.0% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Complex Micro InterconnectionLtd also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Complex Micro InterconnectionLtd's dividend payments are broadly unchanged compared to where they were two years ago.

Final Takeaway

Has Complex Micro InterconnectionLtd got what it takes to maintain its dividend payments? Earnings per share growth has been modest and Complex Micro InterconnectionLtd paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Complex Micro InterconnectionLtd's dividend merits.

While it's tempting to invest in Complex Micro InterconnectionLtd for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Complex Micro InterconnectionLtd you should know about.

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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.

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