Interested In Sinphar PharmaceuticalLtd's (TWSE:1734) Upcoming NT$1.00 Dividend? You Have Four Days Left

It looks like Sinphar Pharmaceutical Co.,Ltd. (TWSE:1734) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Sinphar PharmaceuticalLtd's shares on or after the 4th of September, you won't be eligible to receive the dividend, when it is paid on the 8th of October.

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. Based on the last year's worth of payments, Sinphar PharmaceuticalLtd stock has a trailing yield of around 2.7% on the current share price of NT$37.45. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Sinphar PharmaceuticalLtd can afford its dividend, and if the dividend could grow.

See our latest analysis for Sinphar PharmaceuticalLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Sinphar PharmaceuticalLtd's payout ratio is modest, at just 41% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out an unsustainably high 270% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Sinphar PharmaceuticalLtd is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

While Sinphar PharmaceuticalLtd's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Sinphar PharmaceuticalLtd's ability to maintain its dividend.

Click here to see how much of its profit Sinphar PharmaceuticalLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Sinphar PharmaceuticalLtd's earnings have been skyrocketing, up 110% 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. In the last 10 years, Sinphar PharmaceuticalLtd has lifted its dividend by approximately 6.5% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Sinphar PharmaceuticalLtd worth buying for its dividend? We like that Sinphar PharmaceuticalLtd has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. In summary, while it has some positive characteristics, we're not inclined to race out and buy Sinphar PharmaceuticalLtd today.

While it's tempting to invest in Sinphar PharmaceuticalLtd for the dividends alone, you should always be mindful of the risks involved. For example - Sinphar PharmaceuticalLtd has 1 warning sign we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.