Interested In Hsin Kao GasLtd's (TWSE:9931) Upcoming NT$1.00 Dividend? You Have Three Days Left

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hsin Kao Gas Co.,Ltd. (TWSE:9931) is about to trade ex-dividend in the next three 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. 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. This means that investors who purchase Hsin Kao GasLtd's shares on or after the 27th of June will not receive the dividend, which will be paid on the 24th of July.

The company's next dividend payment will be NT$1.00 per share. Last year, in total, the company distributed NT$1.00 to shareholders. Calculating the last year's worth of payments shows that Hsin Kao GasLtd has a trailing yield of 2.7% on the current share price of NT$37.05. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Hsin Kao GasLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Hsin Kao GasLtd

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Hsin Kao GasLtd is paying out an acceptable 61% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Hsin Kao GasLtd generated enough free cash flow to afford its dividend. Luckily it paid out just 8.7% of its free cash flow last year.

It's positive to see that Hsin Kao GasLtd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Hsin Kao GasLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Hsin Kao GasLtd's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hsin Kao GasLtd has delivered 4.7% dividend growth per year on average over the past 10 years.

The Bottom Line

Is Hsin Kao GasLtd an attractive dividend stock, or better left on the shelf? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

However if you're still interested in Hsin Kao GasLtd as a potential investment, you should definitely consider some of the risks involved with Hsin Kao GasLtd. For example, we've found 2 warning signs for Hsin Kao GasLtd (1 doesn't sit too well with us!) that deserve your attention before investing in the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.

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