Hota Industrial Mfg (TWSE:1536) Is Reducing Its Dividend To NT$1.00

Hota Industrial Mfg. Co., Ltd. (TWSE:1536) has announced that on 26th of July, it will be paying a dividend ofNT$1.00, which a reduction from last year's comparable dividend. This means that the annual payment is 1.8% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Hota Industrial Mfg

Hota Industrial Mfg's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Hota Industrial Mfg was paying out quite a large proportion of both earnings and cash flow, with the dividend being 3,822% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 28.8%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 63% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of NT$0.277 in 2014 to the most recent total annual payment of NT$1.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 23% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Hota Industrial Mfg you should be aware of, and 1 of them is concerning. Is Hota Industrial Mfg 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.

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