Torex Semiconductor (TSE:6616) Has Affirmed Its Dividend Of ¥28.00

Torex Semiconductor Ltd.'s (TSE:6616) investors are due to receive a payment of ¥28.00 per share on 5th of December. This means the annual payment is 3.9% of the current stock price, which is above the average for the industry.

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 Torex Semiconductor's stock price has increased by 34% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Torex Semiconductor Might Find It Hard To Continue The Dividend

A big dividend yield for a few years doesn't mean much if it can't be sustained. Despite not generating a profit, Torex Semiconductor is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Over the next year, EPS might fall by 44.8% based on recent performance. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

See our latest analysis for Torex Semiconductor

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥20.00 total annually to ¥56.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Torex Semiconductor's EPS has declined at around 45% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

We're Not Big Fans Of Torex Semiconductor's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Torex Semiconductor make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Torex Semiconductor that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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