Some investors rely on dividends to grow their wealth. If you're also a dividend expert, you might want to know: Titron Components Incorporated (NASDAQ:TAIT) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the company's record date, which is the date on which the company determines which shareholders are entitled to receive the dividend. The ex-dividend date is important because trades in the stock must be settled before the record date in order to receive the dividend. Therefore, he can purchase shares of Taitron Components by February 15th and receive the dividend that the company will pay him on February 29th.
The company's next dividend will be US$0.05 per share. Last year, the company distributed a total of US$0.20 to shareholders. Looking at the last 12 months of distributions, Taitron Components has a yield of approximately 6.2% on its current stock price of $3.23. If you buy this business for its dividend, you need to understand whether Taitron Components's dividend is reliable and sustainable. We need to see if the dividend is covered by profit and if it's growing.
Check out our latest analysis for Taitron Components.
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. Taitron Components pays out 68% of its profit, which is a common payout level for most companies. However, cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if a company generated enough cash to pay its dividend. The good news is that the company paid out just 10% of its free cash flow last year.
It's positive to see that Titron Components' dividend is covered by both profit and cash flow. This usually indicates that the dividend is sustainable, as a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much profit Taitron Components paid out in the last twelve months.
Are profits and dividends growing?
Companies with consistently growing earnings per share usually make the best dividend stocks, as it is easier to grow dividends per share. If profits decline and the company is forced to cut its dividend, investors could see the value of their investments explode. Fortunately for our readers, Taitron Components' earnings per share have grown at 18% per year over the past five years. Taitron Components is paying out just over half of its profit, suggesting the company is striking a balance between reinvesting in growth and paying dividends. Given the rapid growth rate of earnings per share and the current level of the dividend, it is likely that the dividend will increase further in the future.
The main way most investors assess a company's dividend prospects is by looking at its historical dividend growth rate. Taitron Components has grown its dividend by an average of 9.1% every year, based on the past eight years of dividend payments. It's encouraging to see the company raising its dividend amid growing profits, suggesting that the company has at least some interest in rewarding shareholders.
conclusion
Should investors buy Taitron Components for its upcoming dividend? Taitron Components' growing earnings per share and conservative payout ratio make for a good combination. I also like the low cash flow payments. There's a lot to like about Taitron Components, so we'll make it a priority to take a closer look.
In that regard, you should investigate what risks Taitron Components faces. For example, Taitron Components 3 warning signs I think you should know.
Generally speaking, we don't recommend just buying the first dividend stock you see.Here it is A curated list of interesting stocks with strong dividends.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
