It looks like Medical Imaging Corporation (GTSM:6637) is about to go ex-dividend in the next three days. You can purchase shares before the 27th of August in order to receive the dividend, which the company will pay on the 23rd of September.
Medical Imaging’s upcoming dividend is NT$2.50 a share, following on from the last 12 months, when the company distributed a total of NT$2.50 per share to shareholders. Looking at the last 12 months of distributions, Medical Imaging has a trailing yield of approximately 4.1% on its current stock price of NT$61.3. If you buy this business for its dividend, you should have an idea of whether Medical Imaging’s dividend is reliable and sustainable. As a result, readers should always check whether Medical Imaging has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Medical Imaging paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Medical Imaging generated enough free cash flow to afford its dividend. Dividends consumed 63% of the company’s free cash flow last year, which is within a normal range for most dividend-paying organisations.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Medical Imaging’s earnings per share have been growing at 12% a year for the past five years. Medical Imaging has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the past two years, Medical Imaging has increased its dividend at approximately 51% a year on average. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
From a dividend perspective, should investors buy or avoid Medical Imaging? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we’d also note that Medical Imaging is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, while it has some positive characteristics, we’re not inclined to race out and buy Medical Imaging today.
While it’s tempting to invest in Medical Imaging for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we’ve spotted 4 warning signs for Medical Imaging you should know about.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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