Asia Vital Components Co., Ltd. (TWSE:3017) shares will have an ex-dividend date in two days. The ex-dividend date is usually one business day before the record date, which is the day the company determines which shareholders are eligible to receive dividends. The ex-dividend date is important because investors will not be able to receive the dividend if their stock transaction has not settled before the record date. This means that investors will need to buy Asia Vital Components shares by August 15th to be eligible to receive the dividend, which will be paid on September 20th.
The company's next dividend will be NT$6.957345 per share. Last year, the company distributed a total of NT$7 to shareholders. Calculating last year's payments, we can see that Asia Vital Components has yielded 1.2% over the past year on the current share price of NT$568. If you buy this business for its dividend, you should know if Asia Vital Components's dividend is reliable and sustainable. We therefore need to investigate whether Asia Vital Components can afford its dividend, and whether the dividend is likely to grow.
View our latest analysis of Asia Key Components
If a company pays out more in dividends than it earned, the dividend may become unsustainable – hardly an ideal situation. Thankfully, Asia Vital Components has a modest payout ratio of just 41% of its profits. However, cash flow is usually more important than profits for assessing the sustainability of a dividend, so we should always check if a company generated enough cash to pay its dividend. Pleasingly, the company paid out just 18% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profits and cash flow, as this generally suggests the dividend is sustainable, as long as earnings don't fall precipitously.
Click here to see the company's dividend payout ratio, plus analyst estimates of its future dividends.
TWSE:3017 August 12, 2024 Historical Dividend
Are profits and dividends increasing?
Companies with consistently growing earnings per share usually make the best dividend stocks, as it is easier to grow dividends per share. If business slows and the dividend is cut, the company's value could plummet. So it's reassuring to see that Asia Vital Components' profits have grown at 54% per year over the past five years and are rising fast. Asia Vital Components pays out just under half of its profits and cash flow, yet at the same time it has been growing earnings per share rapidly. This is a very positive combination, and when profits are growing and a company distributes a higher percentage of its profits, dividends can often double over the long term.
The primary way most investors assess a company's dividend prospects is to look at the historical rate of dividend growth, and Asia Vital Components has averaged dividend growth of 43% per year over the past decade. It's good to see that both earnings and dividends per share have grown rapidly over the past few years.
Conclusion
From a dividend perspective, should investors buy or avoid Asia Vital Components? It's great to see Asia Vital Components growing earnings per share while keeping its payout ratios, both profits and cash flow, low. It's unfortunate that the company has cut its dividend at least once in the past, but as things stand, the low payout ratio suggests a conservative approach to dividends, which we appreciate. Asia Vital Components looks solid overall on this analysis and we would consider investigating it further.
So, while Asia Vital Components looks good from a dividend perspective, it's worth staying up to date on the risks associated with this stock.As an example, we've spotted 1 warning sign for Asia Vital Components you should be aware of.
Generally speaking, we don't recommend just buying the first dividend stock you see, so here we present a curated list of interesting stocks with high dividends.
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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 a stock, 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.
