Great Wall Enterprise Co., Ltd. (TWSE:1210) looks interesting and is about to pay dividend

Great Wall Enterprise Co., Ltd. (TWSE:1210) shares will trade ex-dividend in 3 days. The ex-dividend date occurs one day before the record date, the day by which shareholders must be on the company’s books to receive dividends. The ex-dividend date is an important date to note, as any purchase of the shares on or after this date may result in a late settlement that will not be reflected on the record date. Accordingly, Great Wall Enterprise investors who purchase the shares on or after August 1 will not receive the dividend, which will be paid on September 6.

The company’s upcoming dividend is NT$2.222353 per share, after the last 12 months when the company paid out a total of NT$2.20 per share to shareholders. Based on the last year’s payments, Great Wall Enterprise stock has a trailing yield of approximately 3.8% on the current share price of NT$57.40. Dividends are an important contributor to investment returns for long-term investors, but only if they continue to be paid. So we need to investigate whether Great Wall Enterprise can afford its dividend, and if the dividend can grow.

View our latest analysis for Great Wall Enterprise

Dividends are typically paid out of company income, so if a company pays out more than it earned, the dividend is generally at greater risk of being cut. Great Wall Enterprise paid out a comfortable 45% of its profit last year. That said, cash flow is typically more important than profit when assessing the sustainability of a dividend, so we should always check that the company generated enough cash to afford its dividend. Fortunately, the company paid out just 41% of its free cash flow last year.

It is encouraging to see that the dividend is covered by both profits and cash flow. This generally suggests that the dividend is sustainable, as long as profits do not suddenly fall.

Click here to see how much profit Great Wall Enterprise has paid out over the last 12 months.

Have profits and dividends increased?

Stocks in companies that generate sustainable earnings growth often offer the best dividend prospects, as it is easier to increase the dividend when earnings are rising. If the company enters a recession and the dividend is cut, the value of the company can fall precipitously. Fortunately for readers, Great Wall Enterprise has grown earnings per share by 15% per year over the past five years. The company has managed to grow earnings quickly while reinvesting most of its profits within the company. Fast-growing companies that reinvest heavily are attractive from a dividend perspective, especially as they can often increase the payout ratio later.

Another important way to gauge a company’s dividend prospects is to measure its historical rate of dividend growth. Great Wall Enterprise has delivered an average annual increase of 13% in its dividend, based on the past 10 years of dividend payments. It’s great to see earnings per share growing quickly over multiple years, and dividends per share growing along with it.

It comes down to

Should investors buy Great Wall Enterprise for its upcoming dividend? It’s great that Great Wall Enterprise is growing earnings per share while paying out a low percentage of both profits and cash flow. It’s disappointing to see that the dividend has been cut at least once in the past, but as it stands the low payout ratio suggests a conservative approach to dividends, which we like. There’s a lot to like about Great Wall Enterprise, and we’d like to take a closer look.

While it’s tempting to invest in Great Wall Enterprise just for the dividends, you should always consider the risks involved. To help you with this, we’ve discovered 1 warning sign for Great Wall Enterprise what you should be aware of before investing in their stock.

In general, we don’t recommend just buying the first dividend stock you see. Here’s a compiled list of interesting stocks that provide a high dividend yield.

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This article from Simply Wall St is general in nature. We comment solely on historical data and analyst forecasts, using an objective methodology. Our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or financial situation. We aim to provide you with a 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 the shares mentioned.

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