Torex Semiconductor (TSE:6616) Is Due To Pay A 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 3.5% 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 46% 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

If the payments aren't sustainable, a high yield for a few years won't matter that much. 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.

Looking forward, earnings per share could 48.7% over the next year if the trend of the last few years can't be broken. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

See our latest analysis for Torex Semiconductor

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥56.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Torex Semiconductor has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 49% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Torex Semiconductor's Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Torex Semiconductor that investors should take into consideration. Is Torex Semiconductor not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.