Three Days Left Until U-Ming Marine Transport Corporation (TWSE:2606) Trades Ex-Dividend

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 U-Ming Marine Transport Corporation (TWSE:2606) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Meaning, you will need to purchase U-Ming Marine Transport's shares before the 27th of June to receive the dividend, which will be paid on the 25th of July.

The company's upcoming dividend is NT$2.40 a share, following on from the last 12 months, when the company distributed a total of NT$2.40 per share to shareholders. Based on the last year's worth of payments, U-Ming Marine Transport stock has a trailing yield of around 4.3% on the current share price of NT$56.20. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether U-Ming Marine Transport can afford its dividend, and if the dividend could grow.

See our latest analysis for U-Ming Marine Transport

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. U-Ming Marine Transport is paying out an acceptable 63% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 107% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

U-Ming Marine Transport paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were U-Ming Marine Transport to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see U-Ming Marine Transport's earnings per share have risen 14% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the U-Ming Marine Transport dividends are largely the same as they were 10 years ago.

To Sum It Up

Should investors buy U-Ming Marine Transport for the upcoming dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note U-Ming Marine Transport paid out a much higher percentage of its free cash flow, which makes us uncomfortable. To summarise, U-Ming Marine Transport looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that being said, if dividends aren't your biggest concern with U-Ming Marine Transport, you should know about the other risks facing this business. To that end, you should learn about the 2 warning signs we've spotted with U-Ming Marine Transport (including 1 which is significant).

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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