TES Touch Embedded Solutions (Xiamen)'s (SZSE:003019) Dividend Is Being Reduced To CN¥0.45

TES Touch Embedded Solutions (Xiamen) Co., Ltd. (SZSE:003019) has announced that on 11th of June, it will be paying a dividend ofCN¥0.45, which a reduction from last year's comparable dividend. The dividend yield will be in the average range for the industry at 1.7%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that TES Touch Embedded Solutions (Xiamen)'s stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for TES Touch Embedded Solutions (Xiamen)

TES Touch Embedded Solutions (Xiamen)'s Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, TES Touch Embedded Solutions (Xiamen)'s dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 5.8% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

TES Touch Embedded Solutions (Xiamen)'s Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The dividend has gone from an annual total of CN¥0.34 in 2021 to the most recent total annual payment of CN¥0.45. This implies that the company grew its distributions at a yearly rate of about 9.8% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

TES Touch Embedded Solutions (Xiamen) Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that TES Touch Embedded Solutions (Xiamen) has grown earnings per share at 5.8% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On TES Touch Embedded Solutions (Xiamen)'s Dividend

Overall, we think that TES Touch Embedded Solutions (Xiamen) could make a reasonable income stock, even though it did cut the dividend this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for TES Touch Embedded Solutions (Xiamen) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.