Should Income Investors Look At T3EX Global Holdings Corp. (TWSE:2636) Before Its Ex-Dividend?

T3EX Global Holdings Corp. (TWSE:2636) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. This means that investors who purchase T3EX Global Holdings' shares on or after the 11th of June will not receive the dividend, which will be paid on the 10th of July.

The company's next dividend payment will be NT$3.50 per share, on the back of last year when the company paid a total of NT$6.50 to shareholders. Looking at the last 12 months of distributions, T3EX Global Holdings has a trailing yield of approximately 5.8% on its current stock price of NT$112.50. If you buy this business for its dividend, you should have an idea of whether T3EX Global Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for T3EX Global 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. T3EX Global Holdings paid out 60% of its earnings to investors last year, a normal payout level for most businesses. 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. Over the past year it paid out 190% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

T3EX Global Holdings does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

T3EX Global Holdings 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 T3EX Global Holdings to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit T3EX Global Holdings 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see T3EX Global Holdings's earnings have been skyrocketing, up 29% per annum for the past five years. Earnings have been growing quickly, 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. T3EX Global Holdings has delivered an average of 25% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid T3EX Global Holdings? The best dividend stocks typically boast a long history of growing earnings per share (EPS) via a combination of earnings growth and buybacks. So, you might think that T3EX Global Holdings buying back stock, growing its EPS, and retaining profits within its business is a good combination. However, we note with some concern that it paid out 190% of its free cash flow last year, which is uncomfortably high and makes us wonder why the company chose to spend even more cash on buybacks. To summarise, T3EX Global Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into T3EX Global Holdings, it's worth knowing the risks this business faces. To help with this, we've discovered 3 warning signs for T3EX Global Holdings (1 makes us a bit uncomfortable!) that you ought to be aware of before buying the shares.

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.

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

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.