Regular readers know that we at Simply Wall St take a serious look at dividends. That's why we're excited to see AAEON Technology Inc. (TWSE:6579) hit its ex-dividend date in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for stockholders to be on the company's books in order to be eligible to receive dividends. The ex-dividend date is an important date to pay attention to because buying shares after this date could result in delayed settlement that won't be reflected on the record date. So if you buy AAEON Technology shares before August 28th, you'll be able to receive the dividend paid by the company on September 27th.
The company's upcoming dividend will be NT$6.468265 per share, and follows on from the fact that the company has distributed a total of NT$6.50 per share to shareholders over the last 12 months. Calculating the last year's payments gives AAEON Technology's historical yield of 3.8% on its current share price of NT$169.50. While it's nice to see companies paying dividends, it's also important to ensure that you're not killing the golden eggs by laying them. That's why we always check whether dividend payments are sustainable, and if a company is growing.
Read our latest analysis on AAEON Technology
Dividends are typically paid from a company's income, so if a company pays out more than it earned, its dividend is at higher risk of being cut. Last year the company paid out 77% of its profits as dividends. While this is not unreasonable, it limits reinvestment in the business and makes the dividend more vulnerable to a business downturn. It could be a concern if profits start to decline. That said, even highly profitable companies may not generate enough cash to pay the dividend, so we should always check whether the dividend is covered by cash flow. The company distributed 37% of its free cash flow as dividends, which is a comfortable dividend level for most companies.
It's good to see that AAEON Technology'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 suggests a greater margin of safety before the dividend gets cut.
To see how much of its profit AAEON Technology paid out over the last 12 months, click here.
TWSE:6579 August 23, 2024 Historical Dividend
Are profits and dividends increasing?
Companies that are not growing earnings can be valuable, but it is even more important to evaluate the sustainability of the dividend when it is a company that is likely to struggle to grow. If business slows and the dividend is cut, a company's value could plummet. With that in mind, it's not great to see that AAEON Technology's earnings per share have been effectively flat over the past five years. That's better than declining earnings, but over the long term, all of the best dividend stocks grow earnings per share.
The main way most investors assess a company's dividend prospects is to look at the historical rate of dividend growth, and over the past eight years, AAEON Technology has averaged around 10% annual dividend growth.
Conclusion
Should investors buy AAEON Technology for its upcoming dividend? The dividend payout ratio seems relatively conservative, suggesting that the dividend is somewhat sustainable. Still, with earnings being roughly flat, AAEON Technology doesn't stand out from a dividend perspective. Overall, it's hard to get excited about AAEON Technology from a dividend perspective.
If you want to investigate AAEON Technology further, it's worth knowing about the risks this business faces: In terms of investment risks, we've identified 1 warning sign with AAEON Technology, and understanding them should be part of your investment process.
If you're looking for stocks with high dividends, we recommend checking out our picks of the top dividend stocks.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
