Advertisement

Taitron Components Incorporated (NASDAQ:TAIT) Will Pay A US$0.035 Dividend In Three Days

Readers hoping to buy Taitron Components Incorporated (NASDAQ:TAIT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 13th of August to receive the dividend, which will be paid on the 31st of August.

Taitron Components's next dividend payment will be US$0.035 per share. Last year, in total, the company distributed US$0.14 to shareholders. Based on the last year's worth of payments, Taitron Components stock has a trailing yield of around 5.2% on the current share price of $2.67. 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! As a result, readers should always check whether Taitron Components has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Taitron Components

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Taitron Components distributed an unsustainably high 110% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 49% of its free cash flow as dividends, a comfortable payout level for most companies.

It's good to see that while Taitron Components's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

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

historic-dividend
historic-dividend

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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Taitron Components has grown its earnings rapidly, up 48% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last four years, Taitron Components has lifted its dividend by approximately 8.8% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Taitron Components worth buying for its dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Taitron Components is paying out so much of its profit. To summarise, Taitron Components looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while Taitron Components looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 4 warning signs with Taitron Components and understanding them should be part of your investment process.

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.