Three Days Left Until Taiwan Pelican Express Co., Ltd. (TWSE:2642) Trades Ex-Dividend

It looks like Taiwan Pelican Express Co., Ltd. (TWSE:2642) is about to go ex-dividend in the next three 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. Thus, you can purchase Taiwan Pelican Express' shares before the 13th of June in order to receive the dividend, which the company will pay on the 28th of June.

The company's next dividend payment will be NT$0.80 per share, on the back of last year when the company paid a total of NT$0.80 to shareholders. Based on the last year's worth of payments, Taiwan Pelican Express has a trailing yield of 2.1% on the current stock price of NT$38.15. If you buy this business for its dividend, you should have an idea of whether Taiwan Pelican Express's dividend is reliable and sustainable. So we need to investigate whether Taiwan Pelican Express can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Taiwan Pelican Express

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. Taiwan Pelican Express is paying out an acceptable 70% 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 more than half (50%) of its free cash flow in the past year, which is within an average range 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 Taiwan Pelican Express 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 Taiwan Pelican Express, with earnings per share up 9.6% 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Taiwan Pelican Express has seen its dividend decline 6.1% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

From a dividend perspective, should investors buy or avoid Taiwan Pelican Express? Earnings per share have been growing modestly and Taiwan Pelican Express paid out a bit over half of its earnings and free cash flow last year. In summary, while it has some positive characteristics, we're not inclined to race out and buy Taiwan Pelican Express today.

With that being said, if dividends aren't your biggest concern with Taiwan Pelican Express, you should know about the other risks facing this business. To help with this, we've discovered 2 warning signs for Taiwan Pelican Express (1 is a bit concerning!) 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.

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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.